The dream of home ownership is still alive for Victorian first home buyers who are making a comeback in the property market.
Figures released by the Australian Bureau of Statistics on Friday revealed the number of loans by young buyers was up 13 per cent over the year to June.
The increase comes after a second rate cut this year by the Reserve Bank in May and increased confidence in the marketplace.
On top of what is reported by the ABS, there is also a growing number of first home buyers such as Sue Qi who are looking at other avenues to home ownership, such as breaking into the property market as an investor.
The 22-year-old has been living at home with her parents while saving a deposit for an investment property, ideally in the south-east, where she grew up, or in the outer east.
Miss Qi said she would also be receiving help from her parents, and that investing first allowed her to get a foot in the property door even when she wasn’t ready to buy a home to live in for another couple of years.
“I would probably be going for something more affordable than what I would want for myself,” the senior account manager said.
“I’d be investing in something…that I don’t have to be as picky with and in an area where I don’t mind just having an investment.
“I can just sell [it] later on to help me with my own property, as well as being able to do that before the prices keep going up because it doesn’t seem like it’s ever going to drop.”
But the number of first-time investors is expected to fall as banks put the brakes on lending to landlords to take some of the heat out the housing market.
Those looking at the alternative avenue, along with other investors, now face a roadblock with higher interest rates and stricter borrowing rules.
All four big banks have recently targeted investors with interest rate rises of between 0.27 and 0.29 percentage points.
AMP chief economist Shane Oliver said first-time buyers would be “hit the hardest” by the macro-prudential controls.
“One of the things you want to see out of any reforms that run through the housing market is to make life easier for first home buyers, but this certainly doesn’t do that,” he said.
“They get hit by the lower loan-to-valuation ratio because they have a smaller deposit and they get screened out because of they’ve got a lower income.”
Dr Oliver believed an increasing proportion of investor share was being made up of first home buyers, many squeezed out of the owner-occupier market.
But with the tightening of investor loans, he said, first home buyers might benefit from entering the market as an owner-occupier with banks slicing fixed rates for these borrowers.
“Or you might find the bidding at auctions is less intense,” Dr Oliver added.
LJ Hooker research manager Mathew Tiller expected the tougher policies, primarily the loan-to-ratio cap, would slow down the trend of “rentvestors” – people who buy where affordable and renting where they want to live.
“First home buyers and rentvestors would have saved a deposit over a number of years, thinking that they could probably get away with a 5 or 10 per cent deposit,” he said.
“And now obviously that goal has probably doubled, and that’s what’s going to take time for them to re-evaluate their budgets.”
Mr Tiller said those who want to maintain their lifestyle, being close to transport and amenities in the inner city, might choose to rent a little bit longer while they saved a deposit or scale back what they were looking for.
But Domain Group senior economist Andrew Wilson said the inner city was where rents were higher and the queue of prospective tenants longer.
He believed the negatives of entering the market as an investor outweighed the positives.
First-timers would not be eligible for the first home owner grant, which could contribute towards the deposit, he said, and they would need to pay rent and mortgage at the same time.
They would also miss out on the stamp duty concession of 50 per cent for a new or established property valued up to $600,000.
“And then you actually become the landlord, so there’s no guarantee that you would get a tenant and you have to pay all the [landlord’s] costs,” Dr Wilson said.