What Drives First Homebuyers?


First homebuyers are an important segment of the real estate market that assist in driving residential development and the building industry. But what factors drive first homebuyers?

Recent data analysis by the Australian Bureau of Statistics highlights increases in housing supply and economic growth among the main drivers of first homebuyer activity.

Figures of Australian’s utilising the first homeowners grant (FHOG) show Victoria, the state with the highest number of dwelling completions, has shown the biggest growth in first homebuyer activity over the past year. 

Economists say this data shows how increases in housing supply are helping to make homes affordable for first homebuyers. In fact, several economic conditions are important. 

National lending to first homebuyers has declined since 2013, but there are strong variances across states, which suggest a dependency on economic factors.

According to CommSec data, Western Australia, South Australia and Tasmania are the weakest economic performers and first homebuyer activity is dropping in these states.

New South Wales is however an exception. Despite growth in dwelling completions and strong economic performance, affordability still remains an issue for first homebuyers. 

Historically, Sydney has been undersupplied with housing, making it a competitive market and driving prices higher. Experts say New South Wales will need to keep increasing its housing supply if it is to be made more affordable for them.

WA and Tasmania previously had state-based initiatives for first homebuyers which ended in the last year. This could likely be another contributing factor in the decrease of lending to first homebuyers in those states.

The 2009 first homebuyer spike was driven by the nationwide GFC stimulus package and the number of first homebuyers accessing incentives peaked again in 2013, which can be linked to various state-based incentives.

All property buyers, including first homebuyers, require job stability and general confidence to purchase houses.

Furthermore, the national average loan taken out by first homebuyers is now trending downwards and has reached its lowest level since February 2015.

Record low interest rates are also making funding more readily available for first homebuyers.

While there are many driving forces that motivate homebuyers, the effect of the economy, market supply, state initiatives and financial factors are undoubtedly vital to the decision making process.

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