Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

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"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

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Tuesday, 28 May 2013

What's really happening with first homebuyers?

A lot of talk at the moment about what is (or isn't) happening to the first homebuyer (FHB) market at the moment.

Now naturally I stand a chance of making myself look like a total dill, but I've been suggesting for a couple of months that first homebuyers may start coming back into the market as interest rate cuts bite and prices turn upwards. I hope. 

And we have had 2 months of upturn in the FHB market...but it's only been very moderate to date to say the least.

The March 2013 figures showed some promising news with FHB commitments rising by 11% in the month. Which is great. And we've had another interest rate cut since then. 

Naturally enough the percentage of FHB loans fell as investors come flooding back into certain markets such as Sydney.

However, the total commitments figure is still low and it is still down 16% on where it was 12 months ago. Which is not so great at all, and we still have a long way to go to get back to anything approaching a historic 'norm'.

To save me a whole lot of work (navigating around the ABS spreadsheets is a right royal pain in the butt IMO), Michael Matusik has analysed the March Housing Finance data in some detail on Property Update here:

Matusik's key findings relating to FHBs (and it's not particularly great news):

  • "The proportion of first home buyers in the New South Wales & Queensland markets is very low, at 4% & 5% respectively.  They were 13% & 16% just a year ago.  First home buyer activity has increased in Victoria (18% market share) as well as in South Australia (14%) and even in Western Australia (23%, up from 20% the year before).
  • In terms of actual numbers, there were 92,700 first home buyers (who took out a loan) across Australia for the year ending March 2013; this is down 4% on the year before.
  • Based on annualised results – the number of first home buyers in New South Wales is down 39% or by 12,000 on the year before.  Queensland numbers are down 750 or 4% on the previous year, but down 21,000 (yes 21,000 buyers) from the 2010 market peak.  They are up 30% in Western Australia (4,200 more this year versus last); up 15% in South Australia (up 760) & up 13% in Victoria (up 3,200).
The figures also show that something is broken in Queensland & New South Wales when it comes to first home buyers.  Newman & Co. need to implement whatever has been done in Western Australia, South Australia & Victoria, as things for first home buyers seem to be working there.  The recent changes in New South Wales & Queensland (i.e. removing the first home assistance from second-hand property & refocusing it solely on new property) are working wonders.  Not!"

What about new dwellings?

Is there any good news out there?

Source: RBA

The first observation from the above chart related to new dwellings is that all is not equal across the states. 

There has been a decent pick-up in the number of FHBs buying new dwellings in WA, and the trend is moderately up in NSW, SA and QLD.

Victoria saw a large spike in those buying new dwellings back in 2009 but numbers are now falling again (but will pick up again after 1 July when the grant shifts from existing to new dwellings), and the numbers in TAS remain very low. 

In fact, the Tassie market isn't looking too flash at all right now, particularly as the population growth at 500 persons in the last 12 month period recorded is a lot flatter than the Bass Strait.


Naturally, these numbers are distorted by different rules for grants in different states.

The NSW government provides $15k to FHBs purchasing a new home up to the value of $650,000 but has removed its previous $7,000 grant available for both new and existing FHBs.

Property Observer reported today that Tasmania has joined NSW, Queensland and South Australia by announcing plans to axe the $7,000 first-home owner grant (FHOG) for established homes on June 30, 2014.

It will coincide with the end of Tasmania's First Home Builder Boost (FHBB) - a payment of $8,000 - on June 30.

From July 1, Tasmanian first-home buyers who build or buy a new home (including off-the-plan) will be entitled to a $7,000 FHOG. Those buying an existing home will receive no grant.

For the details of all grant rule changes by state, see here.


The ABS housing finance number in total showed a sharp pick up from 2012:

Graph: Value of dwelling commitments, Total dwellings

Source: ABS

In particular, a 21.1% rise in commitments for the purchase of new dwellings:

Source: ABS

At this stage, the number of first homebuyers remains very low and although there has been a small pick-up in the last two months, NSW and QLD had FHB finance commitments at record lows in January and they haven't picked up much from those levels to date.

Since Victoria took away its subsidies for newly constructed dwellings in 2012, FHB mortgage demand has fallen in aggregate. 

So only WA currently paints a reasonable picture in this sector, where FHB commitments are rising strongly, which is excellent news.

Let's hope as the recovery gathers pace, the FHBs return in greater numbers to the market.