The Australian dream of home ownership is becoming increasingly elusive, especially for first-home buyers who are grappling with a unique set of challenges in today's real estate market. A significant trend has emerged over the past year, highlighting the growing reliance on government assistance to enter the property market. Astonishingly, one in every three properties purchased by first-home buyers in the last year involved the federal government acting as a guarantor. This shift is a direct response to the mounting difficulties faced by these buyers in accumulating a 20% deposit, an ordeal exacerbated by soaring property prices and escalating living expenses.
Data reveals a pronounced pattern in the locations where these first-home buyers are investing. A large number are opting for properties in the outer suburbs of capital cities and regional towns. This choice is likely driven by the relative affordability of these areas compared to the urban centers.
The situation is further complicated by the dismal state of housing affordability. According to PropTrack, affordability is at its worst in over thirty years. This crisis presents a daunting challenge for first-home buyers, who are caught in a catch-22: skyrocketing property prices necessitate larger deposits, while high interest rates constrain borrowing capacity and inflate repayment amounts. Angus Moore, a senior economist at PropTrack, shed slight on the alarming decrease in the number of first-home buyers.Approximately 160,000 first-home buyers entered the market in 2021, but this figure dropped by about 30% in 2022 as interest rates climbed. The trend is expected to continue, with projections indicating a further 10% to 15%reduction in 2023, aligning more closely with pre-pandemic levels.
Moore points out that first-home buyers are particularly hamstrung by financing conditions. The data corroborates this, showing a majority of them purchasing in more affordable, outer suburban areas. The deteriorating housing affordability has led to an increased reliance on the government's Home Guarantees Scheme. The scheme's usage has risen dramatically- from one in seven during the 2012-2022 financial year, equating to about 23,300 guarantees, to nearly one in three in the 2022-2023 period, with approximately 41,700 Australians utilizing the scheme to buy a home.
The landscape for first-home buyers in Australia is challenging, with government intervention becoming a crucial factor in making home ownership attainable. The trend towards buying in outer suburbs and regional areas is a testament to the adaptive strategies of these buyers in the face of daunting economic pressures. However, the question remains: How sustainable is this reliance on government guarantees, and what long-term solutions can be implemented to address the root causes of this affordability crisis?
