First home buyers continue to play a small role in the Australian housing market with February data showing that they only represent 14.7 per cent of owner-occupier housing finance commitments – the lowest level since June 2004.

According to the latest figures from the Australian Bureau of Statistics (ABS), first home buyers have the lowest proportion in New South Wales, with only 12 per cent of mortgage commitments over the past 12 months. This is the lowest recorded proportion in NSW, but it comes as no surprise considering Sydney home values have increased by 76 per cent since the beginning of 2009.

The only state where the proportion of first home buyers is higher than the state decade average is Western Australia, where first home buyers represent 21.9 per cent of the owner-occupier market. Home values across Perth have reduced by 4.6 per cent since peaking in December 2014. First home buyers are clearly taking advantage of better affordability and new housing supply in the Perth market.

According to Tim Lawless in his Switzer Daily column, the biggest barrier to first home buyers is affordability. Home prices, especially in Sydney and Melbourne, have appreciated faster than incomes, making it harder for first home buyers to raise a deposit. It also does not help that lenders are seeking a 20 per cent deposit on new mortgages.

Another barrier is the sluggish rent prices. Capital city rents were down 0.2 per cent over the 12 months to March 2016. Declining rates and affordability pressures are likely to push first home buyers to the sidelines for the time being.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now