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First-time property buyer activity is stronger than we think

Property Observer
First-time property buyer activity is stronger than we think

Of all the real estate issues regularly mangled by media, probably the most misreported is the one about first-home buyers and affordability.

Reliable information showing good affordability levels (outside of Sydney) are generally ignored in favour of the much-loved “The Great Australian Dream is Dead” storyline.

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The numbers of first-home buyers are constantly misreported, despite the ABS warnings about the unreliability of the data and the reasons why FHBs are under-counted. 

More credible information, such as the quarterly surveys by NAB which show strong activity from first-time buyers, are shrugged off because it doesn’t fit the prevailing theme of an affordability crisis.

The growing tendency of first-timers to buy an investment property rather than a home is overlooked as a key factor, because it doesn’t suit that pre-determined headline.

And the whole issue of young adults delaying commitment is ignored as well.

It’s pretty well established that young Australians are making different choices to those of their parents. Their preferences can generally be summarised as a deferral of commitment. Getting married, settling down, having kids and establishing a nest – all that can wait. Priorities these days include lifestyle, career and travel.

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There’s lots of research showing this as a major demographic – the young adults who have put off family creation and home ownership until they’ve dealt with the travel bug and indulged other lifestyle priorities.

The latest research on this comes from Westpac, which found that 18 to 35-year-olds — known as Millennials — spent $11.3 billion travelling overseas last year — more than any other age group.

Generation X-ers — aged from 36 to 55 — were the most frugal spending $6.8 billion, followed by Baby Boomers who splashed out $9.8 billion.

Westpac’s Head of Young and Millennial Markets, Ashley Gray, says the decision to prioritise travel over home-buying doesn’t make the age group financially irresponsible.

“They’re very aware of their finances and are prepared to make sacrifices to pursue their passion,” says Gray. “We found that 70 percent of Millennials are saving for eight months before heading overseas on their trip.

“They’re also prepared to make sacrifices while they’re abroad so they’ll walk instead of getting a bus, skip meals and miss out on big tourist attractions.”

Lots of other research in the past couple of years have made similar findings about the different options young Australians are taking, compared to their parents – many of whom were married with kids, a mortgage and a car loan before 30.

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But despite that, there’s still a high level of real estate buying activity by first-timers. It’s largely flying under the radar screen because relatively few first-time purchases are newly-built homes (the ones that get counted as first-home buyers by the ABS).

The latest NAB quarterly Residential Property Survey indicates that a third of sales of new properties across Australia, and 27 percent of sales of established properties, are made to first-time buyers (some of which are buying investment properties, rather than a home, as a first purchase).

The 27 percent of buyers of established homes who are first-timers aren’t counted in the ABS figures, because first-home buyers are identified in the lending statistics by their state government grants, which are now available only for newly-built homes.

I think those daily headlines about an affordability crisis, requiring top-level action by political leaders, are inaccurate and misleading. And when you dispassionately examine what the research tells us, comments about a whole generation being priced out of home ownership are rendered ridiculous.