A new study has revealed that first home buyer investors are the worst off in the property market, even though they have more money than owner-occupied first home buyers.
The research by finder.com.au, one of the country’s biggest comparison websites, has found that 14% of 1,100 Australians are buying their first home as an investment. Those aged 18 to 34 were also most likely to be part of the first homebuyer investors group, with 64% under the “Gen Y” category. Aussies aged 35 to 54, also known as Gen X, occupy 33%.
But for Michelle Hutchison, Money Expert at finder.com.au, first home buyers are still among the lowest levels Australia has seen, accounting for only 15% of all home loans financed. The number has also been steadily declining for over a year.
“Government grants for first home buyers have declined while property prices have grown considerably over the past few years. And now with some lenders pulling back on their attractive rates to investors, first time buyer investors are the worst off,” she said.
“However, this is good news for first home buyer owner-occupiers who are the majority of first home buyers, as it could help alleviate the property market heat, which is being pushed by investors and refinancers. For instance, 42% of home loans financed in April 2015 were investment loans worth almost $13bn. A decade ago, the proportion of investment loans was 34%, worth just over $6bn.”
The report also showed that this generation of first home buyer investors generally have a bigger household income than owner-occupier first home buyers. The former have a household income of over $200,000 (17%) compared to first home buyer owner-occupiers (9%).
The Gen Y first homebuyer investors also have bigger purchase budgets, with 52% of them spending over $500,000. This is a striking contrast to the 35% of first homebuyer owner-occupiers. Moreover, first home buyer investors also appear to have a budget of over $1m (9%) compared to first home buyer owner-occupiers (6%).
“Whether you’re buying your first home to live in or as an investment, prospective borrowers need to be careful with over-stretching themselves as it’s not worth the financial risk if you can’t afford to jump into the market. Work out how much you can afford to repay with a buffer for rising interest rates and stick to a budget or face financial stress down the track,” Hutchison said.