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Cost of living another blow for first home buyers

Aerial photo showing homes in the the centre of an Australian town.
The number of first home buyers taking out new home loans has fallen by 31.1 per cent in 12 months. (Source: Getty) (Tsvi Braverman / EyeEm via Getty Images)

Rising property prices, the increased cost of living and surging rents are making life harder for potential first home buyers.

Yet, the latest results for the February quarter from Andrew Wilson’s My Housing Market First Home Buyer Home Loan Affordability Index reveal a slight improvement in national affordability.

This index measures the proportion of the average income required for the average first-home-buyer home-loan repayment and is derived from ABS statistics.

Also by Michael Yardney:

The higher the index value, the less affordable the repayments.

And while the index fell marginally - by 0.2 per cent - over the February quarter, it still remained 10.0 per cent higher than recorded over the February quarter of 2021, showing how much harder it is for first home buyers at present.

A graph showing housing and loan affordability.
(Source: supplied)

Not surprisingly, the number of Australian first home buyers taking out new home loans has fallen by 31.1 per cent since the near-record peak recorded over the March quarter of 2021.

Wilson explained that while NSW and Victoria recorded slight improvements in affordability over the quarter, affordability has however fallen sharply in those states over the past year, down by 14.7 per cent and 10.2 per cent, respectively.

Other states continued to report declining affordability over the February quarter with higher local index results.

A graph showing housing and loan affordability.
(Source: supplied)

Size of home loans increasing

Wilson reported: “NSW remains the least-affordable state for first home buyers and recorded the highest average first home loan over the February quarter, at $592,107, followed by ACT at $531,956 and Victoria at $502,478.

A graph showing housing and loan affordability.
(Source: supplied)

“Although first home buyer loan affordability has deteriorated over the past year, the recent announcement by the Government of significant extensions to national first home buyer support policies - particularly the popular First Home Buyer Deposit Scheme - will act to improve affordability for this group.

“The significant easing of recent strong home prices growth - particularly in Sydney and Melbourne - is also unequivocally good news for first home buyers.”

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