First Home Buyers – May 2018

AUSTRALIAN MARKET UPDATE

Moves by some states and the federal government to offer buyers cash incentives  towards their first home may actually be throwing fuel on the housing affordability fire. Public policy think tank, The Grattan Institute, has concluded that policies to help first-home buyers and improve housing affordability may actually be making the housing affordability crisis worse. The authors of ‘Housing Affordability: re-imagining the Australian dream’ also noted that politicians were failing to properly explain the situation to voters.

The report stated that proposals aimed at putting more money in the pockets of first-home buyers “will all cost the budget money, and will make housing affordability worse by boosting dwelling prices even further,” according to chief executive John Daley and fellow Brendan Coates.

Initiatives that would have the most positive impact on easing housing affordability in Australia’s major cities — such as changes to planning laws aimed at increasing urban density — have been thrown in the too-hard basket.

The report also found that relatively easy to achieve action on housing affordability doesn’t result in much actual change, whereas the greater the political difficulty, the more positive the resulting change would be.

All policies aimed at increasing the buying power of first-home buyers were labelled “misguided” by the report, including first-home buyer grants, stamp duty concessions, tax concessions for those who save for a home, permissions to use superannuation early on a home, and shared-equity schemes.

“These policies have resulted in spikes of first home buyer activity but haven’t improved affordability,” Mr Daley and Mr Coates wrote, adding, “beyond their sizeable budgetary costs, giveaways to first home buyers have actually worsened housing affordability by further inflating demand for housing”.

“While first-home buyer grants may help some individuals to outbid an investor and buy a house, they do little to make houses affordable at an aggregate level. Instead these policies artificially inflate the demand for housing, resulting in house prices being higher than otherwise, with most of the benefit flowing to existing home owners.”

 

NEW ZEALAND MARKET UPDATE

While total residential real estate commissions are estimated to have fallen by $227 million in the 12 months to March, there are indications that the slump in sales volumes that has occurred over the last 18 months may be starting to bottom out.

Interest.co.nz’s latest quarterly analysis of residential property market activity shows that while sales are still running well below where they were 12 months ago, the rate of decline has slowed markedly. In the 12 months to the end of March almost 73,000 residential properties were sold across the country, down almost 17% on the previous 12 months.

That trend was evident to a greater or lesser degree across the country, even in regions that were supposedly experiencing buoyant conditions such as Waikato, Bay of Plenty, Hawke’s Bay, Manawatu and Wellington. While the Auckland market was particularly hard hit, with sales in the region down 24% compared to the previous 12 months, the rate of decline both nationally and in Auckland, has been steadily decreasing over recent months.

Nationally, the number of sales in the first quarter of this year was almost unchanged from the fourth quarter of last year, and was down just 2.9% on the first quarter last year. That was a big improvement from the second quarter of last year when sales were down 25% compared to the same quarter of 2016, with this trend broadly evident throughout most of the country.

Market-watchers are reflecting on two prime drivers of the quiet lift in activity: banks offering ‘off market incentives and interest rate deals’ as they seek to use their overstocked coffers, along with the country generally now being ‘over’ the impacts of the change of government, which certainly created concern and consequent  inactivity of investors, first home buyers and family home buyers since well before the election and through the coalition process.