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Housing recovery ‘squeezing’ FHBs out of the market

The number of housing finance commitments from first home buyers has fallen for the second consecutive month, new ABS data has revealed, with analysts linking the trend to the resurgent property market.

The Australian Bureau of Statistics (ABS) has released its latest Lending Indicators data, reporting a 1.8 per cent rise (seasonally adjusted terms) in the value of new housing finance commitments in November to $18.5 billion.

Investors led the uptick, with the value of new investor loans rising 2.2 per cent ($5.2 billion), compared to a 1.6 per cent increase in the value of new owner-occupied lending ($13.3 billion).

The value of new first home buyer (FHB) commitments also increased in November, rising by 2.1 per cent to $3.6 billion.

However, according to analysts, the increase in the value of new FHB loans reflected the continued resurgence in residential property prices, with aggregate FHB activity slipping.


According to the ABS, the number of new FHB loan commitments fell for the second month in a row, down 0.9 per cent in November following a 0.4 per cent decline in October – the first back-to-back decline since January 2019.

Reflecting on the statistics, ANZ Research observed that the continued increase in home values could be dissuading aspiring FHBs from entering the property market.  

“Strong housing price growth amidst modest rises in supply are pushing up average loan sizes and squeezing some first home buyers out of the market.”

“The number of loans issued to new home buyers has fallen two months in a row, for the first time since January.”

The latest data from property research group CoreLogic revealed that national home values rose 4 per cent in the three months ending December 2019, driven by sharp growth in Sydney and Melbourne, where values increased by 6.2 per cent and 6.1 per cent, respectively, over the same period.


ANZ Research added that an additional cut to the cash rate in February would accelerate property price growth, compounding housing affordability pressures.

“The expected rate cut in February may exacerbate strong housing price growth and could lead to more upward pressure to loan sizes,” the research group noted.

Also reflecting on the data, Mortgage Choice CEO Susan Mitchell said the drop in FHB volumes may been sparked by anticipation of the federal government's First Home Loan Deposit Scheme

“The fall over the month may be because first-time buyers were holding back from putting their buying plans in action as they waited for the government’s First Home Loan Deposit Scheme to become available in January,” Ms Mitchell said. 

“I am eager to see what the ABS data will reveal as we head into 2020. If the last few weeks are anything to go by, I suspect we may see an increase in demand from the owner-occupier and first home buyer segments as first-time buyers have rushed to reserve places in the First Home Loan Deposit Scheme." 

Maree Kilroy, economist at BIS Oxford Economics, agreed and expects the scheme to offset some of the downward pressure on FHB demand.

“The First Home Loan Deposit Scheme commenced 1 January. Anecdotally, several banks have indicated a strong take-up of the 10,000 home loans on offer, which should encourage first home buyer demand over the coming months,” Ms Kilroy said.

“Withstanding any amendments to this initiative, another 10,000 loans will be available from July 1.”

As at 30 November 2019, FHB loans accounted for 29.7 per cent of all owner-occupier loan commitments (excluding refinancing), down from 29.9 per cent in October. 

[Related: Former APRA curbs still a ‘strain’ on credit growth]

Housing recovery ‘squeezing’ FHBs out of the market
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Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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