Media release - 23rd October, 2013

Flexible approach required for first home buyers

Investors are beating owner-occupiers to the punch for many entry-level properties across Australia, however Raine & Horne warns first timers not to drop their collective bundles.

Recent data from the Australian Bureau of Statistics showed that first home buyer levels represent just 13.7 percent of new mortgages in August 2013, down from 14.7% in July 2013[i], while Angus Raine, Executive Chairman and CEO of Raine & Horne, says investor activity has spiked thanks to improved economic confidence and lower interest rates.

“We’ve probably never before seen the investor market so ascendant, with historic low interest rates, favourable rules for self-managed super funds and a shortage of stock contributing to excellent investor conditions,” says Mr Raine.

Nevertheless, the Raine & Horne chief advises that there are always opportunities for first home buyers to take the plunge into bricks and mortar.

“To be fair, buying a first home has always had it challenges,” says Mr Raine.

“When I dipped my toe into the market for the first time in the late 1980s, the banks made first home buyers jump through many hoops when applying for a mortgage.

“The big lenders were possibly even more dominant than they are now – the non-bank lenders were still years from launching their successful assaults on the bank’s mortgage market monopoly, while interest rates hit 18 and 19 percent in the late 1980s.”

Taking a flexible approach is often a pre-condition for breaking into the housing market, recommends Mr Raine.

“Typically this means looking for more affordable homes in suburbs or towns that may not have originally been on your shortlist, while the often juicy government subsidies involved in buying or building a new property are also worth some consideration,” he adds.

Steve Worrad, Raine & Horne’s General Manager for Queensland, says aspiring first home buyers are chasing house and land opportunities on Brisbane’s fringes.

“We’re seeing time-poor younger people increasingly take advantage of Queensland’s $15,000 Great Start Grant to snap up a brand new house for around $320,000 in these outlying suburbs, where new subdivisions are being built.”

“First home buyers are securing house and land packages on the outskirts of Brisbane in suburbs such as Ipswich, Marsden and Beenleigh,” says Mr Worrad.

In Western Australia, first home buyers are more prominent than in other states, with the ABS reporting that first time buyers made up 23.39 percent of all home loans financed in that state in August.[ii]

In the coastal town of Mandurah, 75 kilometres south of Perth, improved buyer confidence, lower interest rates, housing affordability and the shift to bigger government subsidies for new homes are combining to fuel first home buyer demand and sales.

“Sales to first home buyers have doubled since this time last year, with many younger buyers now taking advantage of WA’s beefed-up First Home Owner Grant of $10,000 for those buying or building new homes, which came into operation on 25 September, 2013,” says Peter Vetten, Principal of Raine & Horne Mandurah.

Nonetheless, Mr Vetten does not attribute the strength of Mandurah’s first home buyer market completely to the heftier grant for new homes.

“In the old days, building a new home for a first home buyer was a daunting experience. However, now builders can put together a house and land package for between $320,000 and $370,000, which means starting from scratch is no longer as daunting. All they have to agree on is the layout, and off they go,” says Mr Vetten.

“Likewise Perth is heating up, and first home buyers are coming to Mandurah because they can secure a four bedroom home, with two bathrooms, on a 600 sqm block for sub-$400,000 prices, while land blocks start from $140,000.”

Likewise in Rockingham, in Perth’s south, affordability is a big driver for first home buyers, with homes available for less than $350,000, with first home buyer activity up 15% since the election.

“This is the first home buyer market, and I’d encourage first home buyers not to be deterred by the changes to the grants for established homes,” says Paul Curran, Principal of Raine & Horne Rockingham Beach.

“I’ll leave the finance to the bankers, but whether you get $3,000 or $7,000 as a subsidy, it’s not a lot of difference when you amortise a $300,000 mortgage over a 25-year loan term.

The upshot is that Mr Curran is urging first timers to make a move before the market leaves them behind and take advantage of the region’s housing affordability.

For example, Raine & Horne Rockingham Beach has listed 20 Linville Avenue, Cooloongup for $320,000.

“This is a double brick, three bedroom home on 683sqm of land with a single carport and roller door, which gives access to a big back yard and workshop – it is a great opportunity for a first time buyer,” says Mr Curran.

“It is located close to schools, transport and Waikiki shopping centre, and we expect this property to move fast.”

-ENDS-

For further media information contact:

Angus Raine, Executive Chairman and CEO, Raine & Horne 0409 920 697

Andrew Harrington, National Marketing & Communications Coordinator on 02 9258 5400

[i] 5609.0 Housing Finance, Australia, August 2013

[ii] 5609.0 Housing Finance, Australia, August 2013 – tables 9B and 10A

Investors dominate Australian real estate – but first timers starting to fight back