Government incentives fail to attract FHBs

The portion of mortgages lodged by first home buyers (FHBs) remained stable (13 per cent) in the third quarter of 2018 when compared to the previous two quarters, an analysis by comparethemarket.com.au of the Australian Finance Group’s (AFG) April Mortgage Index has revealed.

According to comparethemarket.com.au spokesperson Rob Attrill, the data suggests that the state governments’ FHB incentives are no longer stimulating the market.

“State governments, which have made a concerted effort to attract greater numbers of first home buyers into the housing market, will likely be disappointed by these results,” Mr Attrill said.

“The most recent revisions to the First Home Owner Grant made last year encouraged more first home buyers onto the property ladder, taking their share from 8 to 13 per cent in just 12 months. However, given this figure hasn’t moved for three consecutive quarters, it suggests that more needs to be done to tempt first home buyers into the market.”

Mr Attrill noted that he expects recent GST revisions to prompt state governments to improve existing FHB incentives, particularly in Western Australia.

“The recent shock GST distribution announcement could see Western Australia’s share increase significantly,” the spokesperson added.

“Given the average WA mortgage is $441,449 — the third highest of the Australian states — the WA government will likely feel pressure to better incentivise first home buyers, beyond the current maximum $10,000 grant.

“This could act as a useful test case for other states to see if larger grants would encourage stronger market movement in favour of first home buyers.”

Further, Mr Attrill said that FHBs could face additional obstacles if investors are lured back into the market by the continually low cash rate.  

“If greater numbers of investors come back into the market, then this will inevitably put further pressure on first home buyers, making the need for larger grants and concessions even more compelling,” Mr Attrill said.

The comparethemarket.com.au spokesperson also noted the reduction in the market share of the big four banks, with the AFG data also revealing that non-major market share increased from 22 per cent to 37 per cent in five years.

“Consumers are becoming more confident and savvy when it comes to searching for the best home loan for them,” the spokesperson said.

[Related: Government failing to assist FHBs, says bank]