"The head of the Reserve Bank of Australia, Philip Lowe himself said it is an ideal time for first home buyers to get into the market. Our team of property experts at Inception can help you find the right property and begin and process." - Matthew Lapish, Senior Investment Analyst
Reserve Bank governor Philip Lowe says it is a "good time" for first home buyers in Australia because conditions are working strongly in their favour.
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Dr Lowe said he was not concerned about house prices growing too rapidly either, because with virtually zero population growth and international borders closed, the dynamics of Australia's housing market had "fundamentally" changed.
Appearing before a federal parliamentary committee on Wednesday, Dr Lowe was asked if he was telling young Australians to take advantage of the country's historically low interest rates to purchase their first home.
Dr Lowe said he did not like giving financial advice to people, "but it's actually a good time, if you're a first home buyer, to buy the property you've wanted".
"Interest rates are low [and] they're going to stay low," Dr Lowe said.
"There are very large government incentives for first home buyers, and housing prices really across the country are no higher than they were three years ago.
"So for a first home buyer with income security, I think it is a good time to buy.
"And many first home buyers must agree with me because demand from first home owners at the moment is very strong.
"People are responding to the very strong incentives that governments, both the Federal Government and state and territory governments, have laid out."
New loans for first home buyers jump 46 per cent
Bureau of Statistics data show the number of new loans being written each month for first home buyer owner-occupiers has jumped by 46 per cent in the past 12 months.
In September last year, there were 8,961 new loans written for first home buyer owner-occupiers, and that monthly number increased gradually over the summer to reach 9,875 new loans written in March this year.
But in April the number dropped to 8,599, before recovering slightly to 9,136 in June.
Then the numbers started jumping dramatically, recording 10,451 new loans in July, 12,302 new loans in August, and 13,040 new loans in September.
Dr Lowe said it showed first home buyers were taking advantage of record-low interest rates, and government schemes such as the Federal Government's HomeBuilder grant.
He said he was not concerned about house prices rising too strongly because population growth had slowed so much.
"So we'll see pockets that are very strong but across the country as a whole, with population growth so low, I'm not expecting to see big increases in housing prices," Dr Lowe said.
"I think given the cautiousness of the banks and the change in peoples' attitudes to debt, we're not going to see people rushing to the banks to try to borrow 90 to 95 per cent of their loan.
"But if they do, then we'll have to have a discussion with the Australian Prudential Regulation Authority (APRA), the bank regulator, about whether there should be some control there."
Property markets uneven across the country
Dr Lowe said housing markets had been very uneven over the past nine months, with many regional markets doing better than capital city markets.
He said within capital cities there was also diversity, with Melbourne and Sydney more affected by the rapid slowdown in population growth this year than other cities.
"And even within Sydney and Melbourne and other capitals there's quite a difference between house prices and apartment prices," he said.
"Sydney and Melbourne apartment prices are still falling. [There are] high vacancy rates, slower population growth.
"Rents are falling, which is good for renters, but it means prices of apartments are falling.
"I think people are choosing, where they can, to live in houses rather than apartments during the COVID times.
"It's a very uneven picture, but it does appear that the trend is towards higher house prices at the moment and that shouldn't surprise us; lower interest rates do mean higher asset prices. That's part of the transmission mechanism.
However he said the increase in housing prices was likely to be constrained by slow population growth.
"This year the population of Australia is expected to grow by just 0.2 per cent. It had been growing at 1.7 per cent," he said.
"Slower population growth is going to have a first-order effect on housing prices, and you're seeing this very clearly in Sydney and Melbourne and the apartment markets, where vacancy rates are the highest in almost a decade and rents are falling at a rate we haven't seen before.
"So whenever that remains the case it's hard to see a generalised widespread increase in housing prices."
Cameron Kusher, executive manager of economic research at REA Group, said he thought Dr Lowe was "dramatically underestimating" the consequences for house prices of Australians not being able to holiday overseas, in a period when borrowing costs would be historically low "for a number of years."
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Hutchens, G. (2020, December 2). RBA governor says it is a 'good time' for first home buyers. Retrieved from https://www.abc.net.au/news/2020-12-02/rba-governor-phil-lowe-says-good-time-for-first-home-buyers/12942946