When the median house price in Sydney is a whopping $550,000, and $475,000 in Melbourne, you can understand why first home buyers are struggling to get into the market.
And that’s despite record low official cash rates, relatively low mortgage rates as well as incentives offered by government and developers alike.
Housing specialist RP Data-Rismark’s index shows home values have grown by 2.8% in the last three months and are up 4.7% since last year.
Real Estate Institute of Australia president Peter Busby has told the Australian Financial Review (AFR) that difficulties for first-home buyers had not eased, and suggested that they needed more than interest rate cuts to encourage them to enter the market. They are unlikely to get those either with markets increasingly forecasting the next interest rate move as upwards. The major banks including ANZ Bank (ASX: ANZ), Commonwealth Bank (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac Banking Corporation (ASX: WBC) have become dependent on higher cost deposits to fill the majority of their funding needs and as such are unlikely to cut their mortgage rates.
NSW dropped its first home loan grant on established properties in October 2012, which saw home loan approvals drop by 63%. Victoria withdrew its grant for new homes in the middle of last year, and faces a softening unit market, especially in Melbourne which has a looming glut of inner-city apartments, according to the RBA. More than 17,000 apartments in 30 towers in the centre of Melbourne have been approved since 2010, according to the AFR.
Rents in Perth have jumped by 13% in the past year, possibly forcing renters out and into their own homes, which has seen house prices in Perth rise by more than 9% since November 2011.
The number of first home buyers in NSW and Queensland has fallen, but risen in Western Australia. First home buyers remain stuck at around a 15% share of all new home loans, about half the level seen during the Federal government’s first home buyers scheme. To avoid paying lenders mortgage insurance (LMI), borrowers usually need to provide at least 20% of the price of the property as a deposit. For Sydney that means buyers need to come up with a deposit of at least $110,000 to buy the average house, well beyond the reach of most first home buyers.
With first home owners skipping the market, investors have been jumping back in, taking advantage of the low interest rates and rising rents. The RBA has warned that it is watching for any signs that low interest rates are encouraging a property bubble – it may need to keep a closer eye on the housing market in the near future.
With its legendary, fully franked 28 cent dividend, Telstra is the darling of Aussie investors. Chances are even if you don’t own Telstra shares directly, your superannuation fund does. But with its share price skyrocketing over the past year, is Telstra past its prime? Click here for our brand-new report: Buy, Sell, or Hold Telstra?
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.
These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)
Motley Fool Australia's Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.
Our team of investors think these 3 dividend stocks should be a 'must consider' for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.
Don't miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.
Returns As of 6th October 2020
- Why PWR Holdings Ltd could see its share price rise from here – July 21, 2017 12:11pm
- Fortescue Metals Group Limited share price sinks on native title decision – July 20, 2017 4:23pm
- 5 overlooked finance shares to add to your watchlist – July 20, 2017 2:33pm