Survey reveals first home buyers are going into hiding

Written by in First Home Buyers on January 11, 2012

With recent studies showing 60,000 fewer first home buyers entered the market in 2011, getting onto the property ladder is evidently now harder than ever. Along with property prices skyrocketing in recent years, first home buyers are facing a range of issues which are affecting their confidence to buy – including global economic uncertainty, a lack of interest rate stability and cuts to stamp duty concessions. recently conducted a survey of 300 first home buyers to gauge their view of current market conditions and understand what is impacting their decision to make a purchase.

Buyers fall on hard times

In agreement with the general sentiment of the broader market, only 20% of buyers thought it was a good time to buy their first property. This may indicate that interest rate cuts, are still weighing on buyer confidence. In fact, 57% of those surveyed listed interest rate hikes as a major concern.

In addition to interest rates, other key concerns around current market conditions were additional costs to purchase such as stamp duty, body corporate, etc (58%) and the increasing cost of living (54%).

Over 71% of those surveyed also expressed that “housing affordability” was a major concern impacting their decision to buy. This indicates that whilst house prices have decreased they are still at a level that is out of reach for many. With the majority of first home buyers looking to spend between $200-400k – and over 40 suburbs in Victoria and 80 in New South Wales in the million dollar plus bracket, it’s no wonder so many are being priced out of the market.

When the going gets tough

Since beginning their search, 33% of respondents had to increase their budget or completely postpone their purchase, the majority citing the reason as not finding the property they wanted within their budget.  On a larger scale, this is also reflected in the number of first home buyers across Australia plummeting from 150,000 in May 2010 to 90,000 in May 2011*. This was partly driven by the number of first home buyers who brought forward their purchases to 2009 to take advantage of generous stamp duty incentives.

Evidently, even if interest rates were further reduced there are bigger issues impacting first home buyer sentiment – and that is affordability.  Of those surveyed who had abandoned their search, 76% indicated that it would take a significant drop in prices for them to re-enter the market.

Watch this space

It will be interesting keep an eye on activity in the segment in upcoming months as we monitor if interest rate cuts begin to filter through the market in early 2012. Given the recent trend of flat-to-declining property prices, modest income growth and a number of highly attractive home loan packages on offer, many analysts are predicting first home buyers will resurface in the year ahead.

In fact, in certain states we are already seeing first home buyers returning to the market. In Western Australia the proportion of buyers in this segment has increased from 20% to 28% over 2011. Western Australian’s are taking advantage of falling prices, plentiful stock, eager sellers and a host of generous stamp duty concessions.

*   Based on data from