Investors dominate first home buyers in property market war
- Investment loans worth $8.4 billion in January – 5 times more than first home buyers
- Investors expected to price out many first home buyers in 2014
- Which states offer best returns for investors across Australia
- Hope for first home buyers: how to get on the property ladder
March 22, 2014, Sydney – Property investors are dominating first home buyers in the property market war and are likely to continue to price them out in 2014, according to one of Australia’s biggest comparison websites finder.com.au/home-loans.
Despite a slight increase in the proportion of first home buyers out of all owner-occupied home loans financed in January 2014, from 12.7 percent in December 2013 to 13.2 percent, the total value of first home buyer loans was five time less than investment loans financed, according to Australian Bureau of Statistics data analysed by finder.com.au/home-loans.
The total value of investment loan commitments in January was among the highest levels ever recorded with over $8.4 billion, while first home buyers financed $1.75 billion.
Michelle Hutchison, Money Expert at finder.com.au, said property investors are likely to continue a strong hold over first home buyers this year.
“Investors are holding some first home buyers hostage from the property market as they take advantage of low interest rates and high yields. If you’re a first home buyer and not prepared, you won’t get out alive – with a property to own.
“Investors are stronger in the property market than first home buyers because they can use equity from their existing home and take advantage of low rates to snap up properties faster. While first home buyers are slowed down by the cost of saving for a deposit and upfront fees with no existing equity.
“If this trend continues, we can expect to see property investors grow even stronger and likely to hit almost $10 billion in home loans financed per month by December.”
The most attractive states to invest
According to Australian Property Monitors data analysed by finder.com.au/home-loans, the national average unit yield has slightly increased year-on-year by 0.06 percent to 5.27 percent in the December 2013 quarter. While yields for houses dropped by 1.03 percent on average across Australia, sitting at 4.89 percent.
State-by-state, Hobart has the highest yield for houses at 5.64 percent followed by Brisbane with 5.17 percent. For units, Darwin has the highest yield at 5.82 percent followed by Hobart at 5.53 percent.
“Hope is not lost for first home buyers,” said Mrs Hutchison. “If you’re prepared and in a good position, you can compete with investors and find a property of your own.”
finder.com.au’s tips on how to get onto the property ladder:
- If you're a first home buyer, don't be intimidated by investors. If you have a stable job, have saved a deposit and researched home loans you can be confident about jumping into the property market.
- You don't need a huge deposit as many lenders offer loans with up to 3% deposit (97% loan-to-value ratio). For a $300,000 property value, that's a $9,000 deposit (excluding upfront fees)
- Set a budget. Use online calculators – finder.com.au has many calculators – to help you work out how much you can afford to borrow and what it will cost.
- Check government incentives. Some states are offering stamp duty concessions and government grants so check out firsthome.gov.au for eligibility
- Be ready to buy. Before hitting the property market, get your finances in order, compare home loans online, get pre-approval for a home loan so you are ready to make an offer when you find a property you want. There's a huge difference between what lenders are offering, variable rates start from 4.49% up to almost 9% so make sure you compare home loans to help you afford the cost of buying – every 0.25 percentage points is worth $50 difference per month for an average $300,000 home loan.
For further information
The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
More than 3 million Australians turn to finder.com.au every month to save money, time and make important life choices. We compare virtually everything from credit cards, phone plans, health insurance, travel deals and much more.
Our free service is 100% independently-owned by two Australians: Fred Schebesta and Frank Restuccia. Since launching in 2006, we’ve helped our users make more than 17 million decisions.
We continue to expand and launch around the globe, and now operate in the United States and United Kingdom. For further information visit www.finder.com.au.