History shows one thing drives first homebuyer volumes

08 April, 2024: Over the past two decades, the quarterly count of first homebuyers has typically oscillated between 20,000 and 30,000.

The exception is two distinct periods:

  1. 1. The immediate aftermath of the GFC in 2009, and
  2. 2. The COVID-19 lockdowns spanning 2020 and 2021.
First homebuyers by quarter

Source: Australian Bureau of Statistics (ABS). Note: “First Homebuyers (FHBs)” refers to the count of new loan commitments for first-time homebuyers.

Why did these two intervals experience a sudden surge of first homebuyers? A dramatic reduction in interest rates? No. A withdrawal of property investors from the market? No. A willingness to take on high LVR lending? Definitely not.

The answer is: savings.

Six months before these two distinct periods, a dramatic escalation in the savings rate was observed. The typical consumer was able to bring forward their ability to enter into the market with an adequate deposit. Once the savings rate stabilised, the number of first homebuyers went back to normal.

First homebuyers and savings ratio change by quarter

Source: ABS. The Savings Ratio is calculated as the year-over-year proportional change, with adjustments made for instances of negative savings rates.

Interestingly, in the last quarter of 2023, the number of first homebuyers breached 30,000, which aside from the two spikes described above, hasn’t been seen since pre-GFC.

I suspect this is a blip since there is no fundamental data coming out to suggest the start of a new trend. Household savings is clearly down and according to APRA, high LVR lending is down and property investor participation is up. State government shared equity schemes could drive a new trend, however, they currently have limited capital to drive any material volume.

The federal shared equity scheme, Help To Buy, is currently being put into legislation, and with sufficient funding could lift first homebuyer volumes.

There’s also the emergence of a ‘deposit gap’ funding industry, of which FrontYa is a participant. As this new industry matures, it could help support additional first homebuyer volumes.

Either way, what this analysis makes clear is that unless we can lower the ‘deposit gap’, either by increasing savings or alternative funding schemes, first homebuyer volumes will continue to be constrained.

FrontYa is launching its Home Equity Investment Trust (HEIT), which provides investors with exposure to 2x the Australian residential property market growth. Click below to read more.