First-time home buyers enter property market at record rate even as experts tip prices to fall further during recession
- The number of first-time home buyers taking out loans rose by 14.4 per cent
- First-time buyers are taking advantage of low interest rates and plunging prices
- Amanda Seneviratne from ABS also attributed it to easing of social distancing
- The Commonwealth Bank predicts that house prices will drop another 6 per cent
Home loans applications by first-time home buyers have had 'the largest month-on-month rise in the history of the series' as people eager to get on the property ladder take advantage of sliding prices and low interest rates.
The number of first-time home buyers taking out loans rose by 14.4 per cent from June to July, according to the latest ABS figures released on Wednesday.
Overall, the number of owner occupier home loan commitments rose by 8.9 per cent while their value increased by 10.7 per cent in July.
There has been a rush to take advantage of small drops in house prices during the coronavirus recession, even though Australia's largest mortgage holder, Commonwealth Bank, predicts house prices will drop further: a projected six per cent more in the next six months.
The number of first-time home buyers taking out loans rose by 14.4 per cent from June to July, according to the latest ABS figures released on Wednesday (stock image)
ABS head of Finance and Wealth Amanda Seneviratne said the rise in home loans was due to 'social distancing restrictions being eased in most states and territories'.
'July owner occupier home loan commitments rebounded with the largest month-on-month rise in the history of the series,' Ms Seneviratne said.
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'New loan commitments for owner occupier housing rose in all states and territories, except the Australian Capital Territory. The largest increases were in New South Wales, Victoria and Queensland.
New loan commitments for owner occupier housing in Victoria rose 8.9 per cent, reflecting a temporary period of eased restrictions that allowed open inspections and cross-city travel, which was subsequently stopped again late in that month.
A sold home in Canberra. Overall, the number of owner occupier home loan commitments rose by 8.9 per cent while their value increased by 10.7 per cent in July
CBA Chief Economist Stephen Halmarick said: 'Home buying and retail sales continued their strong run in July.
'Prior to the imposition of the stage four restrictions in greater Melbourne, the Commonwealth Bank HSI series data to end of July 2020, showed solid improvement in the majority of spending categories.
'However the tighter restrictions imposed in Victoria, border closures, and the anticipated drop in the population growth rate are a clear source of downside risk to home buying.'
Given Melbourne's current Stage Four Lockdown and Stage Three Restrictions in regional Victoria, the state's figures will likely drop again when the August statistics are eventually released.
Commonwealth Bank, which is the country's biggest home lender with $446 billion of mortgages, had predicted in April that property prices would drop by 10 per cent as a result of coronavirus, but has since moderated that to six per cent given increased demand from first-time buyers.
However, ANZ was still predicting that house prices could drop by almost 15 per cent.
The national border closures have played a significant role in reducing demand, and therefore prices, in the big east coast markets.
Properties in the exclusive suburb of Double Bay in Sydney. CBA Chief Economist Stephen Halmarick said: 'Home buying and retail sales continued their strong run in July.'
