The surprising locations seeing fewer first-home buyers, and where they’re making a comeback

Anne Flaherty
Anne Flaherty

First-home buyers are doing it tough - interest rates are high, real wage growth is negative and with property prices at record highs, it has never been more difficult to scrape together a deposit.

Across Australia, one in five new loan commitments were to first-home buyers in March according to the Australian Bureau of Statistics. While this share has held steady for over two years now, it reflects a marked drop from the peak share of 30% seen back in January 2021.

Since that time, interest rate rises have eroded borrowing capacities by around 30%, subsidies have been reduced, and property prices have continued to climb. This has widened the gap in purchasing power between those looking to get into the market for the first time and those already in it.

But while the national share of new loans to first-home buyers has held steady over the past two years, there are significant differences by state.

Victoria and the ACT saw the highest share of new loan commitments to first-home buyers in March, accounting for 25% and 28% of the total, respectively. On the other end of the spectrum are Queensland and South Australia, where less than 20% of new loans were to first-home buyers.

It is Western Australia, however, that has seen the steepest decline in the share of purchases by first-home buyers, dropping from 40% in January 2021 to 23% in March. Rising investor activity is making up the difference here, with the share of new loans to investors up 15% to 36% over the same period.

First-home buyers sidelined in hot WA market

First-home buyers and investors often compete for similar types of property, and it is likely that the surge in investor activity in Western Australia is contributing to the fall in first-home buyer activity.

This increase in demand from investors is unsurprising. Perth is currently Australia’s best performing capital city, with the median price of a home rising 20.2% over the 12 months ending April, well above the growth seen in any other capital city.

Perth is currently the strongest capital city property market. Picture: Getty

Despite this growth, it remains one of the most affordable capitals, with the median price of a home sitting above only Hobart and Darwin.

In contrast to buying, renting in Western Australia is considerably more expensive compared to the other states. What’s more, it has seen the strongest rent growth in the country, with Greater Perth the fastest growing capital city and regional Western Australia the fastest rest-of-state area.

Perth is the second most expensive city to rent in behind Sydney, while regional Western Australia is the most expensive non-capital city region.

Weak conditions favour first-home buyers in Victoria

In stark contrast to Western Australia, first-home buyers in Victoria have accounted for a growing share of new loan commitments over the past two years.

Conditions are more favourable for first-home buyers in Victoria, particularly in Greater Melbourne, which has seen the weakest price growth of any capital city since the pandemic and prices up just 1.1% over the 12 months ending April.

The median cost of a home in Greater Melbourne is now lower than that of Greater Brisbane.

Melbourne suburbs
Victoria has seen an increase in the proportion of first-home buyers. Picture: Getty

Despite the challenges facing first-home buyers, there are signs that more people are looking to get their first step up onto the property ladder.

While the number of first-home buyers searching to buy on remains below the levels seen 12 months ago, it has steadily risen over past four months.

Challenging conditions in the rental market may be contributing to this. A current shortage of rental accommodation and surging rent costs are likely contributing to the rising number of prospective first-home buyers.

But with property prices continuing to climb, and a cost of living crisis making it more difficult to save a deposit and service a loan, we are likely to see first home buyers increasingly forced to compromise on their ideal locations and property size.

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