First-home buyers borrowing 50 per cent more than they did 10 years ago

NO WONDER first-home buyers are complaining.

New analysis shows the average loan for a first-home buyer has increased by 50 per cent in the last 10 years, with one state recording a 66 per cent increase.

A website set up to help aspiring property owners, First Home Buyers Australia, analysed Australian Bureau of Statistics data and found the amount people were borrowing to buy their first home had increased dramatically.

“These increases are also significantly higher than the wage growth over the past 10 years”, FHBA co-founder Daniel Cohen said.

FHBA looked at housing finance data released for April 2016 and compared it to data from the same month over the past decade.

It found the value of loans granted to first-home buyers increased by 50 per cent from $221,100 to $330,600 in the past 10 years.

The state with the biggest increase was the Northern Territory, followed by Western Australia, Victoria, South Australia and NSW.

FHBA co-founder Taj Singh said the results reflected one of the biggest complaints first-home buyers reported in their online surveys.

“People can’t keep up with the price gains while saving up for a deposit,” Mr Singh said.

“They are planning to save $100,000 for a $500,000 home but as the median has gone up, they’ve got to save another $20,000 to buy their first home.”

Mr Singh said low interest rates also made it harder for savers.

“It’s not helping people saving, they are not able to earn as much interest on their savings,” he said.

“But investors are aided by low interest rates as they can borrow more and also get generous tax concessions such as negative gearing and the capital gains tax discount.”

Housing affordability has an election issue with Labor promising to pull back negative gearing and the capital gains tax discount.

Labor MP Andrew Leigh noted on Q&A recently that buying a house now costs 15 times the average income of young people.

“In the early 1990s, buying a house in a big Australian city cost five times the average young Australian’s income, now it’s up to 15 times,” Mr Leigh said.

The Coalition has also come under fire for not doing more to help, and the Prime Minister’s comments that parents should help their children to buy a house, fell flat.

Mr Singh said FHBA analysis showed the increase in loan size far outstripped the rate of inflation.

He said the official Reserve Bank Australia figures for 2006 to 2015 showed inflation rose by 25.3 per cent, a lot less than the 50 per cent increase in first-home buyer loans.

“Over the 10 years inflation has risen 25.3 per cent which accounts for only half of the increase in the average loan sizes first-home buyers between 2006 and 2016,” he said.

He said FHBA believed negative gearing should be pulled back to halve the amount of interest that is tax deductible for those owning existing properties, but those buying new homes should be able to keep the deduction.

Labor Party policy goes further than this and removes negative gearing on existing properties entirely.

“We don’t support the Labor policy 100 per cent but it is good to see Labor at least mention first-home buyers,” he said, adding that his organisation was not affiliated with any political party.

“We would rather a policy with less impact on the housing market, a drop in housing prices won’t be good for the economy, which is one of the biggest factors driving growth at the moment.”

FHBA is encouraging people to support their open letter asking the government to help first-home buyers by reducing negative gearing incentives, as well as scaling back the CGT discount and reintroducing the First Home Savers Account.

“Housing affordability has been an issue of debate over the last few years, however it is not a debatable issue anymore” Mr Singh said.

“It is something that is happening now and needs urgent attention otherwise the great Australian dream of home ownership is going to be out of reach for many young Australians”.

STATE BY STATE BREAKDOWN

The average loan size for a first-home buyer increased,

NSW: 51 per cent from $258,700 in April 2006, to $391,900 in April 2016

VIC: 58 per cent increase from $209,900, to $331,500

QLD: 36 per cent increase from $214,500, to $290,800

SA: 56 per cent increase from $173,500, to $271,400

WA: 62 per cent increase from $197,000, to $321,100

TAS: 41 per cent increase from $165,400, to $233,900

NT: 66 per cent increase from $187,900, to $312,300

ACT: 38 per cent increase from $236,600, to $326,400

June 11, 2016 / news.com.au

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