THE RESERVE BANK BOARD’S DECISION TO CUT THE CASH RATE TO A HISTORICAL LOW IN EARLY MAY HAS ENCOURAGED A STRONG LIFT IN FIRST HOME BUYERS IN WESTERN AUSTRALIA.
The number of applications for the FHOG increased 22 per cent in May, reaching levels not seen outside the 2008/09 construction stimulus period.
Urban Development Institute of Australia (WA Division) CEO Debra Goostrey said that first home buyers continue to take advantage of historically low mortgage rates.
“Despite talk of WA’s mining industry coming off the boil, growing numbers of first home buyers are still taking advantage of the historically low interest rates.”
“There were 34.2 per cent, or 5,384, more FHOG applications over the year to May, and nearly double as many application as two years ago,” said Ms Goostrey.
First Home Owner Grants Paid, monthly, Western Australia
“For many first home buyers, the cost of servicing a mortgage is similar to or less than what it costs to rent.”
The average FHB loan in WA during 2013, according to the latest figures from the Bureau of Statistics, is $315,000, which at 5 per cent interest (the typical 2-yr fixed rate on offer) gives an average weekly cost of $425 – less than the median Perth rent of $470.
“An increasing number of first home buyers are looking at new dwellings rather than established,” said Ms Goostrey.
FHB interest in new dwellings increased 35 per cent in May and 57.2 per cent over the year to 6,483 applications. Meanwhile, applications for established homes increased 16 per cent in May and 26.1 per cent over the year. Established homes, however, still accounted for over two-thirds of all FHB purchases over the last 12 months.
Ms Goostrey said that suburbs associated with new land releases dominated the list of top FHB suburbs.
Baldivis continues to attract the largest number of first home buyers with sales per month up 69 per cent in 12/13 compared to 11/12; followed by Ellenbrook (up 58 per cent) and Byford (up 59 per cent).
Top 12 locations – FHOGs paid, monthly average
| Suburb/Location | 2012/13 | 2011/12 | Increase |
|---|---|---|---|
| Baldivis | 56 | 33 | 69% |
| Ellenbrook | 37 | 24 | 58% |
| Byford | 26 | 16 | 59% |
| Piara Waters | 24 | 18 | 34% |
| Canning Vale | 24 | 22 | 10% |
| Butler | 24 | 18 | 34% |
| Thornlie | 22 | 15 | 47% |
| Banksia Grove | 21 | 17 | 24% |
| Nollamara | 19 | 11 | 75% |
| Harrisdale | 18 | 14 | 36% |
| Gosnells | 18 | 14 | 33% |
“The Institute’s research shows an uptick in demand for land since the early May rate cut,” said Ms Goostrey.
“The largest developers in Greater Perth sold, on average, 16 per cent more lots in May compared to April.”
Ms Goostrey said that the low rate environment has also encouraged investors to become more active in housing markets in Western Australia.
The value of investor housing loans over the year to April in Western Australia is up 14.2 per cent on levels 12 months ago.
Ms Goostrey said that the combination of more FHBs becoming home owners and exiting the rental market and higher levels of housing investment has led to easing pressure in the Perth rental market.
“The number of rental listings has risen throughout the year, lifting the vacancy rate to an average of 2.7 per cent over the three months to May 31, which is well up on 2012 levels of 1.8-1.9 per cent.”
“Three per cent is considered a ‘normal’ market.”