HOME BUYERS

For most Australians, buying a home involves raising a deposit and 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 the deposit, the policy of lenders regarding borrowing limits and the ability of the borrower to repay the loan. The last is, in turn, influenced by household income and housing loan interest rates.

During the period from 1994–95 to 2010–11, the number of dwellings financed has grown overall. In 2010–11, banks and other lending institutions financed 580,000 dwellings for owner occupation, 68,000 fewer than in the previous year, but still 28% higher than in 1994–95. While the number of established dwellings financed grew from 348,000 in 1994–95 to 496,000 in 2010–11, the number of new dwellings financed for construction or purchase declined from 103,000 to 83,000 over the same period (although there was a jump to 104,000 in 2009–10) (graph 10.14). In 2010–11, new dwellings represented 14% of all dwellings financed in Australia. Western Australia had the highest proportion of new dwellings financed (20%) and New South Wales had the lowest (10%).

Between 2002–03 and 2010–11, project home prices increased by an average of 40%, while established house prices increased by an average of 71%. Movements in established house prices were more volatile. They increased from 2002–03 to 2003–04, levelled off in 2005–06, again increased until 2007–08, then declined slightly in 2008–09 before rising again to their 2010–11 level (graph 10.15).




Average loan sizes increased along broadly similar lines to house prices between 1994–95 and 2010–11. For most of the period, the average loan size for first home buyers was slightly less than for changeover buyers (graph 10.16). However, in 2008–09, first home buyers' average borrowings slightly exceeded those of changeover buyers, before dropping back below them in the two subsequent years. In 2010–11, first home buyers borrowed an average of $281,000, which is $45,000 less than the average loan size of changeover buyers, the largest such difference since the series began.




Differences in average loan sizes between states and territories tended to reflect differences in median house prices (table 10.17). Average loan sizes in 2009–10 were highest in New South Wales ($302,000) and Western Australia ($290,000), and lowest in Tasmania ($194,000).

10.17 HOUSING FINANCE FOR OWNER OCCUPATION, HOUSE PRICES AND PROPERTY VALUES
			NSW	Vic.	Qld	SA	WA	Tas.	NT	ACT	Aust.
Dwellings financed – 2009–10
	New dwelling built or purchased(a)	'000	20.0	33.8	19.9	7.6	17.7	1.7	0.5	2.0	103.5
	Established dwelling purchased(b)	'000	171.8	129.8	111.8	45.1	61.3	10.3	4.5	10.1	544.6
	All dwellings financed	'000	191.8	163.6	131.7	52.7	79.0	12.1	5.1	12.0	648.1
Average loan size – 2009–10
	First home buyers(c)	$ '000	303	270	280	237	292	199	303	289	281
	Non-first home buyers	$ '000	302	275	275	216	289	193	278	265	278
	All dwellings financed	$ '000	302	260	276	220	290	194	282	270	279
Change in capital city Project Home Price Index from 2002–03 to 2009–10(d)		%	26	23	47	31	71	48	66	33	37
Change in capital city Established House Price Index from 2002–03 to 2009–10(e)		%	25	85	101	90	140	125	147	71	66
Median price of capital city established house transfers – March Qtr 2009(f)		$ '000	583	469	460	404	518	352	529	540	na
Median estimated value of all owner occupied dwellings 2009–10(g)
	Capital city	$ '000	550	480	470	400	500	350	520	500	490
	Balance of state	$ '000	370	280	400	291	400	300	400	na	350
	Total	$ '000	450	410	435	370	490	320	500	500	440
Average amount of mortgage outstanding – 2009–10(h)
	Capital city	$ '000	239	207	220	180	232	140	247	223	219
	Balance of state	$ '000	168	138	202	124	172	126	195	na	169
	Total	$ '000	214	188	210	167	220	132	235	223	202
na not available (a) A new dwelling is one that has been completed within twelve 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 twelve 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) Measures change in the cost of building a new house on buyer's own land.
(e) Measures change in prices paid for house and land, including new house/land packages.
(f) Prices paid for established houses (including land) purchased in the reference period.
(g) Householder's own estimate of the market value of their dwelling at the time of the survey.
(h) 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).

Between 1994–95 and 2009–10, the average real disposable income of households who were lone persons under 35 years increased by 65%. That of couple only households with a reference person under 35 years increased by 45%, and that of couples with dependent children increased by 66% (graph 10.18). In the same period, the average loan size, after adjustment for inflation, increased by 99%.




Approximately 1.1 million Australian households bought a home in the three years prior to the 2009–10 Survey of Income and Housing (which was conducted during the 12 months ended June 2010). Of these, 40% were first home buyers and most were young households with a reference person aged under 35 years (67%) (table 10.19). About 10% of first home buyer households had a reference person aged 45 years and over. In contrast, more than half (52%) of changeover buyer households had a reference person aged 45 years and over.

Changeover buyers are often able to use the substantial equity in their previous dwelling as a 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 2009–10, the estimated median value of dwellings occupied by changeover buyers was $450,000 compared with $370,000 for first home buyers. While changeover buyers had slightly larger outstanding mortgages than first home buyers, the proportion of owners with a mortgage was lower (73% compared with 93%).

Consequently, average weekly housing costs of changeover buyers were lower than for first home buyers – $387 compared with $460. Changeover buyers also spent a smaller proportion of household income on housing than first home buyers – 18% compared with 23%.

		Recent home buyers
		First home buyer(b)	Changeover buyer(c)	All recent home buyers	All owner households
PROPORTION OF HOUSEHOLDS WITH REFERENCE PERSON AGED:
Under 35 years	%	66.6	17.7	37.2	11.8
35–44 years	%	23.6	30.7	27.9	19.1
45–54 years	%	7.3	23.6	17.1	22.5
55–64 years	%	*1.7	16.4	10.5	20.7
65 years and over	%	**0.8	11.6	7.3	25.9
PROPORTION OF HOUSEHOLDS IN SELECTED FAMILY/HOUSEHOLD GROUPS
Lone person	%	20.4	17.8	18.8	21.4
Couple only	%	32.7	28.1	29.9	29.8
Couple family with dependent children	%	31.3	38.9	35.9	29.2
One parent with dependent children	%	3.6	4.9	4.4	3.7
Proportion of households that built/purchased a new dwelling(d)	%	18	23	21	na
Estimated mean value of dwelling(e)	$'000	404	553	494	530
Estimated median value of dwelling(e)	$'000	370	450	420	440
Proportion of households with a mortgage	%	93	73	81	53
Mean amount of mortgage outstanding(f)	$'000	280	289	285	190
Average weekly housing costs	$	460	387	417	232
Housing costs as a proportion of income	%	23	18	20	13
Estimated number of households(g)	'000	429.0	644.8	1 073.8	5 774.9
na not available * 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
(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.