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The real reason first-time buyers are being locked out the property market

Samantha Menzies

Entering the Aussie property market is a big hurdle for first-home buyers, especially when they’re faced with strong competition from buyers who hold much larger buying budgets.

While home value rises have been moderate over recent years outside of Sydney and Melbourne, it provides little comfort for first home buyers in the two largest cities who struggle to compete with those that already own homes,” CoreLogic research analyst Cameron Kusher said.

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According to Corelogic RP Data, today’s data shows that the value of property for homeowners has undergone a significant increase since 2008, but yet the increase in inflation and wages has been comparatively more sedate.

“Although combined capital city home values have increased by 51.7% between December 2008 and April 2016, inflation has increased by a significantly lower 17.1% over the period,” he said,

Also read: 120 Aussie suburbs could be set for a price plunge

“CPI [consumer price index] has increased by a greater amount than values in Brisbane, Adelaide, Perth and Hobart indicating ‘real’ home values have fallen. Meanwhile in Sydney, Melbourne, Darwin and Canberra CPI growth has lagged that of home value growth.”

At the same time, there has been a reduction in the value of new lending to owner-occupier first-time buyers in the same eight year period.

“[As a result] those that do not yet own a property will struggle to compete with investors and upgraders who have been active in the market and where significant equity has been acquired,” Kusher said.

He suggested that the simplest answer would be for first-home buyers, particularly in Sydney and Melbourne, look to buy properties outside of the city.

But yet he also pointed out this is yet another dampener facing these homebuyers given jobs creation is not as strong outside of the major Aussie cities.

Also read: The six most important wealth-building lessons from multi-millionaires

“Even buying outside of Sydney in nearby regional cities may not be attractive because transport infrastructure does not provide quick and efficient access to Sydney and Melbourne from nearby regional cities,” Kusher said.

“Whatever the outcome, we certainly don’t advocate for the return of grants for first home buyers as they have tended to just push up the cost of housing,” he said.