Continuing our series on the latest Digital Finance Analytics household survey results, today we turn to those wishing to enter the property market for the first time.
Looking briefly at those wanting to buy, but are not able to at the moment (about 1.1 million households, down from 1.3 million last year), whilst fear of unemployment and interest rate rises continue to dissipate, home prices are just too high relative to their income, to consider market entry. This is also influenced by their costs of living, and an inability to get finance. We also note a rise in “other factors”, which include needing to get finance help from family or friends.
Turning to those actively seeking to enter the market in the next year for the first time (about 312,000 households), we see that more are motivated by potential future capital growth than needing a place to live. In addition, tax advantage was cited by around 15 per cent of first time buyers as a key driver, whilst access to the first home owner grant has become ever less important.
Looking at the barriers to purchase, first time buyers say that high home prices remains the most significant barrier, and as a result just finding a place to purchase is a challenge. Whilst fear of unemployment and the impact of rising interest rates have reduced, more are saying that availability of finance is an issue now as lending criteria are tightened.
Well over 20 per cent of first time buyers are not sure what, or where they will buy. More are likely to buy a unit than a year ago, and less likely to buy a house.
We also continue to see a proportion considering buying an investment property, perhaps a cheaper property in an area they do not want to live in, as a way to enter the market, and participate in potential capital growth. This may be the key to an owner occupied purchase later.
We publish monthly data on the number of first time buyers who go direct to the investment sector from our surveys and overlay this on the ABS data. Around 4,000 are buying each month. The ABS data also shows the number of first time buyers is rising, to May 2016, though still well below the peak.
Next time we will do a deep dive on the investment property sector.
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