Investors Shoot Up, First Home Buyers Fizzle Out

first home buyersHome loan commitments to owner-occupiers have reached its monthly peak, calculated since October 2009.  Both refinance and non-refinance commitments are trending much higher over monthly and year to year indices. A disturbing trend, however, is the marginalisation of the First Home Buyers (FHBs).

First home buyers

First Home Buyers are only cornering 12.5% of total owner-occupier home loan commitments. While their proportion was 14.4% in January 2013, their share was a meagre 13.2% in January 2014.

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The data seems to resonate with the dip in the fortunes of the first home buyers. Investment-centric activity from the real dollar-carriers has pushed the prices way beyond where the First Home Buyers can think of sharing the pie.

SMSF investments

Another feature of the market hurting the FHBs no end is the pressure applied by the baby boomers. The zeal of the seniors is in many parts due to the aid they seem to be getting from their SMSF. Residential investments in SMSF are still below average but enough to keep the FHBs elbowed out of the race.

Low interest rate climate

The interest rates are sticking really low and this is in part helping FHBs. Add to this the government grants and the various savings account schemes government has introduced for them. Despite these initiatives, the FHBs seem more bent towards staying with parents for longer years, aiming to save enough to pay the upfront fee.

I won’t venture towards figuring out what would happen to FHBs once 1) interest rates correct themselves and move up, 2) residential SMSF investments increase, 3) prices escalate even further due to apparent housing shortage.

Should SMSF investments be marginalised in residential real estate?