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In the challenging landscape of Australia's housing market, a ray of hope has emerged for first home buyers. Despite high interest rates and surging house prices, one state has become a beacon for those looking to step onto the property ladder. Victoria has taken the lead as the state with the highest number of first-home buyers in the country, offering a glimmer of opportunity in an otherwise daunting market.
The National Picture
Across Australia, the housing market has been presenting significant hurdles for first-home buyers. Rising home prices and increased mortgage rates have led to the worst housing affordability conditions on record. This challenging environment has resulted in delayed home ownership for many, with census data showing a decline in home ownership rates for successive birth cohorts since the late 1940s.
However, there's a silver lining. Despite these obstacles, the number of first-home buyers nationally remains above the average seen over the past decade. This resilience in first-home buyer activity can be attributed to several factors:
- Tight rental market conditions, pushing those who can afford it to buy sooner
- Persistent increases in home prices, motivating buyers to enter the market before it becomes even less accessible
- Government support schemes, concessions, and grants
- Expanded eligibility criteria for various assistance programs
Victoria: The First-Home Buyer Haven
Victoria has emerged as the frontrunner in first-home buyer activity, accounting for a remarkable 32% share of all new loans to first-home buyers. The state has seen a significant increase in first-home buyer numbers, with new loans to this group 14% above the decade average levels.
What Makes Victoria Attractive?
Subdued Growth and Increased Choice
Melbourne has experienced the weakest growth of any capital city since the pandemic, creating a more stable environment for first-home buyers. With prices holding steady over the past year, buyers have more confidence to enter the market. Additionally, both Melbourne and regional Victoria have seen an increase in available stock, providing more options for potential buyers.
First Home Guarantee Scheme Success
The First Home Guarantee Scheme (FHGS) has been particularly successful in Victoria. More than a quarter (28%) of first-home buyers who used the scheme in the 2023-24 financial year came from Victoria. This government initiative allows first-home buyers to purchase a property with just a 5% deposit, with the government guaranteeing the remaining 15%.
Higher Eligibility Under the Home Guarantee Scheme
Melbourne boasts the highest share of properties eligible for purchase under the Home Guarantee Scheme among all capital cities, except Darwin. While other cities have seen a significant decline in eligible properties due to strong price growth, Melbourne's property values have remained relatively stable.
Lower Investor Activity
Unlike other states, Victoria has not seen the same surge in investor activity. Changes to property taxes and tenancy legislation have made investment properties less attractive in the state. This reduced competition from investors has created more opportunities for first-home buyers, with loans to this group accounting for 24% of total loans in July 2024 - the highest share of any state.
Challenges in Other States
South Australia
Adelaide has the smallest share of properties eligible for purchase under the Home Guarantee Scheme among all capital cities. This limitation, coupled with a significant decline in affordability over the past year, has made it particularly challenging for first-home buyers in South Australia.
Western Australia
Despite being the most affordable state to service a mortgage and save a deposit, Western Australia has seen a shift towards investor activity. The share of purchases by first-home buyers has dropped from 39% in January 2021 to just 18% in July 2024, while investor activity has surged.
Looking Ahead
While conditions for first-home buyers remain challenging across Australia, there's reason for optimism. Interest rates are expected to move lower next year, which could boost borrowing capacities and improve affordability. This potential easing of financial pressure, combined with ongoing policy support, may lead to increased first-home buyer participation across the country.
For those considering entering the property market, particularly in Victoria, now may be an opportune time to explore your options. With the state emerging as a haven for first-home buyers, it's crucial to be well-informed about the various schemes and opportunities available.
Need help with your property journey?
Contact Pearson Chambers Conveyancing:
Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au
We offer a free Section 32 contract review to ensure you're making an informed decision on your path to homeownership.