Where have first-home buyers gone?

Statistics show that many first-home buyers have staged a disappearing act / File

HERE'S a missing persons mystery that may require a real estate super-sleuth to solve.

Where are all the first-home buyers going?

Despite low interest rates and flat or falling house prices in the past few years making it seem like a good time to get into property, statistics show that many first-home buyers have staged a disappearing act.

Mortgage broking giant AFG says of the 7500 mortgages it sold last month, just 12.9 per cent were to first-time buyers, down from 14.9 per cent a year ago.

And CommSec's analysis of the latest housing finance data found the proportion of first-home buyers in the market was at an eight-year low in January at 14.9 per cent.

So where are they? Are they blind to the opportunity, or are they smart? It depends on who you listen to.

One theory is that the watering down of first-home owner grant schemes in many states has removed a tasty carrot for buyers. However, when the grants were at their peak during the GFC, first-home sales boomed but prices at the cheaper end of the market were also inflated, meaning little real benefit for buyers.

Another theory is that young Australians today are more interested in lifestyle and travel than they once were, and are happy to stay at home for longer, benefiting from the Bank of Mum and Dad. They've seen turmoil in property, shares and super in recent years and wonder why they would bother.

My personal theory is that the first-home buyers are not permanently missing - they are just playing a game of hide and seek. Both of the above theories apply, and the market forces of supply and demand will eventually entice them back.

The median house rent for Australia’s capital cities is $524 per week, but mortgage repayments on a median-priced house of $493,000 - less a 10 per cent deposit - cost about $670 per week before other costs such as council rates. Once renting becomes more of a financial drain than buying, and mum and dad decide enough is enough, the first home crowd will return, albeit a little older than their predecessors.

There are still massive benefits in being an owner rather than a renter. They are just waiting for the numbers to stack up again.
 

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