The January housing finance data was released this week and it showed, as predicted, a slowdown in activity by first home buyers in January 2012. There are a couple of points to note about these results:
- The fall in volumes was anticipated given the removal of first home buyer stamp duty concessions in the country’s largest housing market, New South Wales; and
- The figures are not seasonally adjusted so you typically see a sharp slowdown in January each year due to many buyers and sellers being on holidays
The data shows that the number of first home buyer finance commitments fell by -21.6% over the month however, non-first home buyer finance commitments to owner occupier volumes fell by a slightly lower but similar -18.7% over the month. At this time of year it is much more telling to look at the proportion of first home buyers compared to all owner occupier finance commitments.
Over January 2012, there were 8,172 owner occupier finance commitments to first home buyers which equated to 20.3% of all owner occupier finance commitments. It was also right in line with the five year average proportion (20.4%) and it was much higher than the 16.2% of all owner occupier finance commitments in January 2011. It’s also telling to look at the difference in the number of first home buyer finance commitments this January compared to last year. The number of first home buyer commitments in January 2012 were 44.7% higher than what was recorded in 2011. On the other hand, non-first home buyer finance commitments in January 2012 were only 10.1% higher than the previous year.
At an individual state level the proportion of first home buyers increased across all states and territories except for New South Wales and the Australian Capital Territory over the past month. The proportion of loans to first home buyers in January 2012 varied from 14.0% in Tasmania to 23.0% in the Northern Territory. At the same time in 2011, the proportion of first home buyer loans varied from 13.1% in South Australia to 18.2% in Western Australia. Across each state except Tasmania the proportion of first home buyers in January 2012 was higher than in 2011.
We certainly aren’t expecting first home buyer volumes to come roaring back in 2012 however, activity has been improving on the back of an improved affordability scenario. Next month’s data should start to provide more clarity about any trend that is developing with regard to first time buyer activity. We would expect that lower property values and higher rental rates (which is what we are currently seeing) is likely to attract more first home buyers into the market. The exception of course is likely to be New South Wales with much of the demand brought forward due to the incentives for first home buyers that were in place in late 2011.