First property prospects not getting any better

By Grace Ormsby

February 17 2020
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First home buyers will continue to be challenged by affordability issues in their attempts to enter the housing market, according to a new report.

First property prospects not getting any better

The 2020 Deloitte Australian Mortgage Report revealed a common sentiment that first home buyers will continue to be challenged through supply issues, a squeeze on wage increases and a rebound to the property market.

With productivity levels not flowing through to an improvement on wages growth, Michael Thomas, Deloitte Access Economics’ financial services lead, conceded that over the coming year, it will be “really hard to see first home buyers make headway against others in the market”.

According to Mr Thomas, “Where the Australian economy heads over the next year is even more dependent on the pace of housing construction than it usually is.”

“Housing construction is headed down rapidly at the same time that house prices are headed up rapidly,” he commented.

“Those seesawing conditions – prices up, volumes down – suggest housing construction has rather further to fall. However, Australia’s population growth is too strong for falls to be sustained much beyond 2020, which is likely to be the low point,” the financial services expert has predicted.

Looking ahead, NAB’s general manager of home lending, Paul Riley, outlined that for the Australian property market to sustainably grow, “we need to be building more houses, and customers will need more income and confidence”.

Resimac’s head of third-party distribution, Daniel Carde, also weighed in, cautioning that “the only way you’ll see sustained growth in the first home buyer’s market is through product innovation focused on affordability”.

He said first home buyer schemes aren’t a “solution” to the underlying issue of affordability.

“That’s not going to get any better as housing prices particularly in Sydney and Melbourne start to improve again. Brisbane also hasn’t really gone anywhere either,” he commented.

“If you couldn’t buy a house there three years ago, you are not going to be able to do so today either, because affordability is still the same.”

The challenge of affordability sentiment for first home buyers was also expressed by ANZ’s general manager for home loans, John Campbell.

He suggested that banks are doing their bit to support first home buyers, “so it is not a question of desire or ability to make credit available to that segment”. Instead, it’s “more about how to get them into the market responsibly”.

Mr Campbell noted that for a medium-priced home in Sydney, it’s taking around 11 years to save for a 20 per cent deposit.

Melbourne is slightly better – at 9.6 years.

The national average for a medium-priced home is 8.6 years, according to ANZ modelling.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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