First home buyers set to benefit from housing slump

Financial comparison website RateCity.com.au found that first home buyers face a tougher environment than last year, with the release of its second First Home Buyer Index.
But despite these concerns, the RateCity report shows property prices were relatively stable over the past 12 months and some states are lower. The national average house price for instance, (based on the RP Data-Rismark Hedonic Index using the capital cities data) fell by 0.15 percent to about $491,000.
"Interest rates have been on hold since November 2010, and recent Reserve Bank comments suggest relatively slow rate movements for the rest of 2011," says Mr Smith.
"We believe this is a very good time for potential first home buyers who are confident about their employment prospects and have a solid track record of building savings, and can therefore meet repayments with confidence."
RP Data's research director, Tim Lawless agreed.
"With household incomes growing at 6 percent per snnum, interest rates potentiall approaching the peak of the tightening cycle, rents increasing, and house values going nowhere, buyers are seeing an improvement in their position," he said.
"With first time buyers now representing a bit less than 15 percnet of all owner occupier housing finance commitments it is likely that market activity in the first-time buyer market will increase in the medium term."
The RateCity Index measures the level of difficulty for first home buyers entering the property market. It compares household incomes, first home buyer mortgage sizes, the benchmark basic variable rate – which is the average of the four major banks including ANZ, Commonwealth Bank, National Australia Bank and Westpac – monthly repayments and percentage of income towards repayments.
Currently first home buyers are facing tougher challenges than 12 months ago, with the RateCity Index lifting by nine points since February 2010 to reach 120 points in February 2011.
Damian Smith, RateCity’s CEO, said the biggest factor contributing to this change was interest rates.
"There’s no doubt that first home buyers are nervous about their chances of getting a foothold in the property market. We’ve seen the benchmark basic variable rate lift by 115 basis points in the past year to 7.17 percent. Also, lower government grants for first home owners, plus general consumer uncertainty are hanging over the market," says Mr Smith.
"The average first home buyer is paying around $164 more per month in mortgage repayments compared to 12 months ago, which has a big impact on the family budget.
"As a result, the level of activity from first home buyers is historically low. Compared to 12 months ago, the proportion of first home buyers out of all home loans financed has fallen by 3.7 percentage points to 14.9 percent."

Source: http://finance.ninemsn.com.au/pfproperty/buying/8242582/first-home-buyers-set-to-benefit-from-housing-slump

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