Today's First Home Buyer
Owning your own home still remains a goal for many Australians and first-time buyers represent about 18% of total home loan lending. As the market has become more affordable interest among first time buyers has increased.
As affordability improves the FHB can, as we know access a range of incentives including stamp duty savings, FHB grants and in some areas developer incentives, along with the advantage of low interest rates usually around 3.6%.
Plus, for some buyers there’s a helping hand from mum and dad. Combined it looks a much-improved outlook for the first-time buyer.
However, there are still some barriers for any FHB and while prices are down housing affordability is still a hurdle. A situation made more complex by a lack wage growth. There’s also been a big shift in FHB demographics impacting how future projects might best serve this rising market.
One option is buying off-the-plan, this can be an attractive way to enter the market and recently we published a First Home Buyers Guide to buying off -the-plan. It’s well worth reading to gain an understanding of this popular way to buy a new apartment or house.
Savvier and More Demanding
There’s no shortage of evidence to show that market activity and prices are down across the board. We also know that fewer people are getting loans to buy homes or investments.
However, the proportion of FHBs is growing as we see lenders are tighter on eligibility it also seems that the FHB is changing and changing a lot.
While it’s true that we might be familiar with the nature of the FHB starting out to buy their first home, there are some emerging trends that will have far-reaching impacts on the FHB market.
Not only are we facing the age of the Millennials, we also see that FBHs are these days older, perhaps wiser but, for sure they are much more selective.
On average the FHB is older. Back in the earlier 1990’s they averaged 27 years of age however, some recent research shows today 31 is more typical and in Sydney and Melbourne they may well be even older again and facing bigger income gaps. Almost every FHB does have to face the reality that while property prices have risen over the last decade, wages and salaries have grown at less than snail’s pace.
One key reason for this jump in the age of FHB's is not only changing expectations around lifestyle and travel goals, but the reality that it’s taking much longer to save a deposit. And just as some prices may have eased, many lenders now require larger deposits, often 20% but generally more than the traditional 10%.
Sometimes we might be inclined to think of the FHB as a freshly minted couple, recently wed and planning a family. Today that’s a very different picture, we have same-sex couples, family groups and couples who may have lived together for many years in rented are shared housing.
Until their 30's and 40's renting has suited their lifestyle choices and allowed for travel and greater career flexibility and mobility however, now as they get older, security and possibly having children has an impact.
Homes still offer a feeling of security that all buyers nominate as a key reason for buying and it’s a need that naturally become stronger as we age and the appeal of back-packing around exotic locations fades.
However, this very high-level focus on security often means that today’s FHB will end up taking extra time to find the house or apartment that best suits their needs.
Today’s FHB is not so willing to play leap-frog through a succession of purchases. Partly because they better understand the stress, and costs involved with buying and selling. They are also more sensitive to the rising prices that can be associated with up-grading.
It’s a trend that in part helps to explain why 2-bedroom and 3-bedroom apartments and town-homes are now more popular. An FHB in 2019 takes the long-term view they are not out to speculate on continued market gains and they are selective in terms of location and existing facilities.
Invest to Buy
If today’s FHB is adjusting to saving for a 20% deposit they are also looking at other financial options to help them get their ideal home and that includes investing in property, and the figures are not always easy to measure.
However, it is a choice some make and that can include living at home longer. Despite the characters used in some TV commercials, depicting the reluctant stay-at-home adult-child, many do believe that it’s okay to live with their parents, and beyond the age of 30.
It’s also interesting that some FHBs in more expensive markets are just as likely to make their first purchase an investment property. This can include the purchase of an investment property out of their city, home state or in regional areas. It’s a trend that again reinforces the fact that FHB's are very market savvy.
As FHB's get older and more selective the reality is that at some point lenders do start to be even tougher with loan applications and it’s an issue that some couples who divorce can have to face.
This can eventually favour downsizing to an apartment, and again this is driving demand for bigger and quality apartments among this group of potential FHB, and they are also keen to stay in familiar areas.
Another big impact on the demographic of the FHB is later parenting. The figures are telling and the impact on the shape of the housing market is very obvious. The headline is that we are having children much later in life.
In 1991, the average age of first-time mothers was 25.8. By 2015, it had increased to 30 plus, and dads are also older, these days parenting looks very much like something many of us do in our 30's rather than our 20's.
Migrants and first adult children of migrants are also a big part of the FHB market, they are more often than not urban focused and are not that interested in green-field or outer-suburban locations.
Today’s FHB is under more financial pressure, older, much more selective, well-educated, possibly a property investor, could be divorced or about to have a family, well-travelled and not in a hurry.