Chat with us, powered by LiveChatHousing recovery driven by first home buyers

Housing recovery driven by first home buyers

After two years of abstinence, home-buyers have been seen taking a sip from the debt bottle. Just a little one.

First home buyers accounted for 20 per cent of total housing finance commitments taken out in November last year, data released by the Australian Bureau of Statistics on Monday showed. This compared with 19.1 per cent in October.

In percentage terms, the number of home loans taken out by first home buyers was at its highest level in 22 months in November. The number of first home buyers dropped off in early 2010 following the end of the federal government's First Home Owner Boost Scheme, which offered additional grants of up to $14,000. For most of 2011, they accounted for between 16 and 18 per cent of total housing finance commitments.

The greater proportion of first home buyers in November helped drive a 1.4 per cent rise in the number of housing finance commitments in November, the figures showed. By value, total housing finance rose 2.1 per cent in the month, seasonally adjusted, to $20.344 billion. However, total commitments remain well below long-term average growth.

St George Economist Besa Deda said that with more first home buyers in the market, home prices should stabilise in 2012.

"That's also a positive element because it means that it is helping improve the liquidity in the market. We think it will help in the stabilisation of house prices in the first half of this year and that a modest improvement in house prices will come in next year."

The rise in finance commitments comes after the Reserve Bank of Australia cut interest rates on Melbourne Cup Day but economists have downplayed the impact of that decision on these figures.

Macquarie senior economist Brian Redican said it was too early to gauge the effects of the November rate cut or the December cut that followed.

"These numbers don't reflect those cuts yet and it will have to take a few more months for that to flow through," he said.

However, he said said the two rate cuts would provide a further boost to housing this year.

"I think it does have to have a positive impact. What it does do is just make housing more affordable for those people that were thinking of going into the housing market."

The rise in housing finance commitments, which was in line with economists predictions, is not expected to weigh heavily on the RBA when it decides whether to cut rates next month.

"I think (the RBA) would have largely expected this trend to continue improving," Ms Deda said.

"It's the European developments and more general global developments which are top of mind for the RBA."

Source: The Age Domain