The housing market could potentially welcome fewer first-home buyers this year as affordability challenges continue to arise.

InvestorKit head of research Arjun Paliwal said the housing boom over the past year has meant that many first-home buyers could not keep up with the rising prices.

“The biggest challenge for those looking to buy in 2022 and beyond will be their home deposit,” he said.

“While money remains cheap, benefits on offer with price caps attached aren’t very possible to stay under due to price growth.”

Activity from first-home buyers already started waning late last year — in fact, new loan commitments to the segment was down by 16% annually in October.

CoreLogic’s latest price index showed a 22.1% annual growth in house prices in December, with Hobart, Brisbane, and Sydney posting the biggest gains.

Mr Paliwal said the market is now entering phase two of the cycle, where price growth would be driven by the high demand.

“The first growth phase of the property cycle in 2021 had one common factor, almost all markets across Australia had low stock and prices increased as a result,” he said.

Many markets carry solid fundamentals that will continue to support their growth momentum, including localised strength in their economies, the continuation of the exodus, their relative affordability.

“This year, we can expect property prices to be led by high demand in select areas extending their growth cycle rather than a blanket approach of low stock nationally.”

This means, however, that growth would not occur at the same pace as it did last year as there will be variances across micro markets.

“Whilst large amounts of growth did occur in most locations, not all carried on with the same intensity through that boom period,” Mr Paliwal said.

“Buyers need to be strategic and look at the data to understand where markets continue at this pace.”


Photo by @terry_quangt on Unsplash.