First Home Buyer Struggles

First Home Buyer Struggles

Author: Peter Boehm

The number of first home buyers in the Australian market continues to fall away as a growing proportion of the population continue to lose hope of achieving the great Australian dream of owning your own home.

The situation is likely to get much worse for the next generation of aspiring home owners as property prices continue to rise and loan affordability becomes problematic.

A recent study conducted in the United Kingdom demonstrates the problems faced by first home buyers in the UK property market, which reveals alarming similarities with the situation here in Australia.

A report released by the Resolution Foundation[1] concluded that the dream of home ownership for many first time buyers in the UK was effectively dead and buried.

Using the Bank of England figures, the report indicated that around 46% of non-home owners surveyed believed they would never own their own home. And don’t think this 46% was confined to only the poorest in the nation, because it wasn’t. Around 25% of high income earners in the same cohort also felt the same.
Major Problems for UK First Time Buyers

The main reasons cited among those surveyed included:

High property costs (46%)
Mortgage affordability (33%)
Maintenance costs (10%)
Lack of access to mortgage finance (32%)
Concerns about job security (13%)

The report also highlighted that it would take around 24 years for a low to middle income earning household to save a deposit.

I’ll just let that sink in for a minute. That’s 24 years! So for those in the UK who start saving in their mid to late 20’s, they’d be in their early 50’s before they could buy! No wonder so many peoplpe across the pond have lost hope of ever owning a home.

So, what does this have to do with the great Australian dream of owning your own home?
First Home Buyers in Australia Face Similar Obstacles

There are a lot of similarities between the report findings when compared to the challenges and obstacles faced by today’s FHBs here in Australia, particularly around affordability and home loan serviceability.

While the ability to save a deposit is not as severe as in the UK, the deposit gap is an ongoing issue that is likely to worsen as house prices increase and major home loan providers tighten their lending criteria.

And then of course we have the spectre of increasing interest rates.

For example, the charts below show the decline in FHB activity in the Australian market between October 2014 and October 2015.

As you can see by the charts, the percentage of loans to FHBs dropped from 17.0% to 15.1% between October 2014 and 2015. And, when it comes to the value of home loans, FHBs are getting deeper and deeper into debt as average loan sizes continue to increase – the average loan size taken out by FHBs was $356,000 in OCtober 2015, which is $36,000 (11.25%) higher than it was in October of the previous year. Furthermore, this has occurred during a time when home loan rates have been at historical low levels.
Why the UK experience is important for Australia

Australia and UK share many similarities when it comes to home ownership.

For instance, both countries have a high-home ownership rate (around 67%), both try and give everyone a reasonable chance of buying their first home and both countries rely heavily on mortgage finance as a means to purchase property and follow a similar process when it comes to conveyancing. However, there are also some big differences – particularly when it comes to land size and population…
Country Population Land Size (sq. km) # of People per Square KM
UK 64 million 244,820 248.3
Australia 24 million 7,687,000 3

FHB_Commitments Chart



As the above table indicates, Australia is a substantially larger country than the UK in terms of land mass – being around 31 times, but has 40 million fewer residents.

Significantly and not surprisingly, our population density at around three people per square kilometre is around 1% of the UK’s 248. However, it is worth remembering that Australia is classified as having an arid and semi-arid climate, with around 18% of its land mass being desert.

If we were to equate the UK’s population density to Australia, it suggests, on a like for like basis, that we should be able to support around 1.6 billion people.

Of course this comparison is simplistic and unrealistic, but I think a reasonable person would recognise that whatever the number is, we should be able to adequately support and provide affordable home ownership for a lot more people than we do today – if we had the right housing strategies and policies in place. After all, we don’t have the same land and population constraints as the UK – or many other countries for that matter.
The Way Forward

There is wide spread recognition by the public, politicians and the media that Australia has a FHB housing problem, which is likely to get much worse for the next generation of aspiring home owners as property prices continue to rise and loan affordability becomes problematic.

The reality for many young (and not-so-young) renters, home ownership will never happen. My sense is that we are already well down a similar path to that in the UK and we need to change direction. Increasing housing supply has to be a key objective for our political leaders.

Of course there are social, environmental, political and financial considerations that need addressing (to name but a few) and the problem is not going to be solved overnight. But now is the time to make a start so we don’t find ourselves in a situation where a growing proportion of our population has no hope of becoming a home owner.

If you’re a first time buyer, or know of someone looking to buy their first home, click here to download the free affordable suburb listings, which shows all the affordable suburbs for each state and territory.

Peter Boehm is the Finance Editor for

Published: 18 February, 2016.