HOME BUYERS
For most Australians, buying a home involves raising a deposit then borrowing a substantial amount of money from a bank or other lending institution which then holds a mortgage on the property. The amount borrowed is influenced by a number of factors including the price of the property, the amount of deposit, the policy of lenders regarding borrowing limits, and the ability of the borrower to repay the loan (which in turn is influenced by household income and housing loan interest rates).
During the period between 1994-95 and 2006-07 the number of dwellings financed grew considerably. In 2006-07, banks and other lending institutions financed 777,000 dwellings for owner occupation, 43,000 more than in the previous year. While the number of established dwellings financed each year has grown from 348,000 in 1994-95 to 681,000 in 2006-07, the number of new dwellings financed for construction or purchase has declined from 103,000 to 89,000 over the same period (graph 10.14). In 2006-07, new dwellings represented 12% of all dwellings financed in Australia. Western Australia had the highest proportion of new dwellings financed (14%) and New South Wales had the lowest (8%).
Established house prices increased from 2002-03 to 2003-04, then levelled off until 2005-06, when they again increased, in line with the rise in established home purchases (graph 10.15). Between 2002-03 and 2006-07 project home prices increased by an average of 22%, while established house prices increased by an average of 33%.
Average loan sizes increased along broadly similar lines to house prices between 1994-95 and 2006-07. For most of the period, the average loan size of first home buyers was slightly less than for non-first, or changeover, buyers (graph 10.16). However, in 2004-05, first home buyers' average borrowings exceeded that of changeover buyers and in 2006-07 this gap widened, with first home buyers' borrowing an average of $230,000, more than $5,000 above the average loan size of changeover buyers.
Differences in average loan sizes between states and territories tended to reflect differences in median house prices (table 10.17). Average loan sizes in 2006-07 were highest in New South Wales ($248,000) and the Australian Capital Territory ($234,000), and were lowest in Tasmania ($167,000).Between 1995-96 and 2005-06, the average real disposable income of households who were lone persons under 35 years increased by 29%. That of couple-only households with a reference person under 35 years increased by 25%, and that of couples with dependent children increased by 42% (graph 10.18). In the same period, the average loan size, after adjustment for inflation, increased by 75%.
More than 1.1 million Australian households bought a home in the three years prior to the 2005-06 Survey of Income and Housing, which was conducted during the 12 months ended June 2006. Almost 30% were first home buyers, most of whom were young households with a reference person aged under 35 years (68%) (table 10.19). Less than 11% of recent first home buyer households had a reference person aged 45 years and over. In contrast, more than half (56%) of recent changeover buyer households had a reference person aged 45 years and over.
10.17 HOUSING FINANCE FOR OWNER OCCUPATION, HOUSE PRICES AND PROPERTY VALUES | ||||||||||||
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| | | NSW | Vic. | Qld | SA | WA | Tas. | NT | ACT | Aust. | |
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| Dwellings financed - 2006-07 | | | | | | | | | | | | |
| New dwelling built or purchased(a) | '000 | 18.4 | 23.4 | 21.7 | 7.4 | 14.8 | 1.5 | 0.6 | 1.0 | 88.7 | |
| Established dwelling purchased(b) | '000 | 204.5 | 148.9 | 154.9 | 55.4 | 89.8 | 13.1 | 5.8 | 9.1 | 681.5 | |
| All dwellings financed | '000 | 222.9 | 172.3 | 176.6 | 62.8 | 104.6 | 14.5 | 6.4 | 10.1 | 770.2 | |
| Average loan size - 2006-07 | | | | | | | | | | | | |
| First home buyers(c) | $'000 | 257 | 219 | 229 | 185 | 219 | 164 | 203 | 232 | 230 | |
| Non-first home buyers | $'000 | 246 | 220 | 224 | 178 | 225 | 168 | 201 | 235 | 224 | |
| All dwellings financed | $'000 | 248 | 220 | 225 | 179 | 224 | 167 | 201 | 234 | 225 | |
| Change in Project Home Price Index from 2002-03 to 2006-07(d)(e) | % | 13 | 10 | 27 | 15 | 58 | 31 | 43 | 18 | 22 | | |
| Change in Established House Price Index from 2002-03 to 2006-07(d)(f) | % | 7 | 30 | 58 | 44 | 130 | 91 | 82 | 37 | 33 | | |
| Median price of established house transfers - December qtr 2006(d)(g) | $'000 | 500 | 360 | 340 | 295 | 456 | 275 | 380 | 422 | na | | |
| Median estimated value of all owner occupied dwellings 2005-06(h) | | | | | | | | | | | | |
| Capital city | $'000 | 500 | 350 | 350 | 285 | 350 | 262 | 320 | 380 | 380 | |
| Balance of state | $'000 | 300 | 250 | 300 | 240 | 300 | 209 | na | na | 290 | |
| Total | $'000 | 400 | 310 | 340 | 275 | 350 | 240 | 300 | 380 | 350 | |
| Average amount of mortgage outstanding - 2005-06(i) | | | | | | | | | | | | |
| Capital city | $'000 | 216 | 151 | 155 | 120 | 139 | 111 | 153 | 150 | 166 | |
| Balance of State | $'000 | 149 | 110 | 142 | 109 | 121 | 94 | na | na | 132 | |
| Total | $'000 | 193 | 139 | 148 | 117 | 136 | 101 | 147 | 150 | 155 | |
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| na not available | ||||||||||||
| (a) A new dwelling is one that has been completed within 12 months of the lodgement of a loan application, and the borrower will be the first occupant. | ||||||||||||
| (b) An established dwelling is one that has been completed for 12 months or more prior to the lodgement of a loan application, or that has been previously occupied. | ||||||||||||
| (c) Persons entering the home ownership market for the first time. | ||||||||||||
| (d) Weighted average of eight capital cities. | ||||||||||||
| (e) Measures change in the cost of building a new house on buyer's own land. | ||||||||||||
| (f) Measures change in prices paid for house and land, including new house/land packages. | ||||||||||||
| (g) Prices paid for established houses (including land) purchased in the reference period. | ||||||||||||
| (h) Householder's own estimate of the market value of their dwelling at the time of the survey. | ||||||||||||
| (i) Only includes owners with a mortgage. | ||||||||||||
| Source: Housing Finance, Australia (5609.0); House Price Indexes: Eight Capital Cities (6416.0); Housing Occupancy and Costs, Australia (4130.0.55.001). | ||||||||||||
Changeover buyers are able to use the equity in their previous dwelling as an often substantial deposit on a more expensive 'upgrade'. Many will be able to discharge their mortgage quickly and some may not need to borrow at all. In 2005-06, the estimated median value of dwellings for recent changeover buyers was $360,000 compared with $290,000 for recent first home buyers. While changeover buyers had larger mortgages than first home buyers, the proportion of owners with a mortgage was lower (64% compared with 95%).
Consequently, average weekly housing costs of changeover buyers were lower than for first home buyers - $296 compared with $398. Changeover buyers also spent a smaller proportion of household income on housing than first home buyers - 19% compared with 26%.
10.19 RECENT HOME BUYERS(a), Selected household characteristics - 2005-06 | |||||||
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| | | Recent home buyers | | | ||
| | | First home buyer(b) | Changeover buyer(c) | All recent home buyers | All owner households | |
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| Proportion of households with reference person aged | | | | | | | |
| Under 35 years | % | 67.8 | 17.9 | 31.7 | 13.5 | |
| 35-44 years | % | 21.4 | 26.5 | 25.1 | 20.5 | |
| 45-54 years | % | 7.9 | 23.9 | 19.5 | 22.8 | |
| 55-64 years | % | *2.1 | 15.7 | 11.9 | 18.7 | |
| 65 years and over | % | **0.8 | 16.0 | 11.8 | 24.5 | |
| Proportion of households in selected family/household groups | | | | | | | |
| Lone person | % | 21.6 | 20.3 | 20.7 | 21.7 | |
| Couple only | % | 33.0 | 30.8 | 31.4 | 29.9 | |
| Couple family with dependent children | % | 33.8 | 34.9 | 34.6 | 29.8 | |
| One parent with dependent children | % | *2.7 | 4.3 | 3.9 | 3.9 | |
| Proportion of households that built/purchased a new dwelling(d) | % | 13.6 | 24.5 | 21.5 | na | | |
| Estimated mean value of dwelling(e) | $'000 | 315 | 428 | 397 | 412 | | |
| Estimated median value of dwelling(e) | $'000 | 290 | 360 | 340 | 350 | | |
| Proportion of households with a mortgage | % | 95.4 | 64.0 | 72.7 | 50.0 | | |
| Mean amount of mortgage outstanding(f) | $'000 | 213 | 225 | 221 | 155 | | |
| Average weekly housing costs | $ | 398 | 296 | 324 | 185 | | |
| Housing costs as a proportion of gross income | % | 26 | 19 | 21 | 13 | | |
| Estimated number of households(g) | '000 | 317.8 | 830.9 | 1 148.7 | 5 490.1 | | |
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| * estimate has a relative standard error of 25% to 50% and should be used with caution | |||||||
| ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use | |||||||
| na not available | |||||||
| (a) Households that built or purchased their dwelling in the three years before the survey. | |||||||
| (b) Recent home buyer households in which neither the reference person nor their partner had previously owned a dwelling. | |||||||
| (c) Recent home buyer households in which either the reference person or their partner had previously owned a dwelling. | |||||||
| (d) A dwelling is new if it was built under contract for the current owner or purchased from a builder/developer and the current owners are the first to live in it. | |||||||
| (e) Householder's own estimate of the market value of their dwelling at the time of the survey. | |||||||
| (f) Only includes owners with a mortgage. | |||||||
| (g) Includes all family and household groups. | |||||||
| Source: ABS data available on request, Survey of Income and Housing. | |||||||
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