First home buyer sentiment sinks as property prices climb: ME Bank

sydney-skyline-on-sunny-day

Australians looking to buy their first home are feeling increasingly negative about the property market thanks, in part, to skyrocketing house prices across the country.

That’s one takeaway from ME Bank’s latest Quarterly Property Sentiment Report, which outlines the attitudes Australians hold towards the residential property market based on a national survey of 1,000 first home buyers, owner occupiers and investors.

The report found that 34% of first home buyers are currently feeling negative about the property market - the highest level of negativity expressed since 2019 and a five percentage point increase on last quarter.

Unsurprisingly, levels of positive sentiment among the cohort dipped to a two-year low of 24%, while those feeling neutral remained relatively steady at 42%.

Overall, sentiment across all survey respondents also decreased. Positivity towards the property market has dropped from 49% to 42% since the start of the year, while negativity increased from 14% to 19%.

"When property prices and interest rates lowered last year during the pandemic, a unique buying opportunity opened up for confident first home buyers with cash savings and secure employment, while many investors became nervous,” said ME’s head of home loans and personal banking, Claudio Mazzarella.

“Now prices have rebounded strongly and affordability is going down, first home buyers aren’t feeling as positive.”

Affordability issue going nowhere

The issue of housing affordability is not a new topic by any means, but as Mazzarella noted, it’s a problem which is being put under an increasingly greater spotlight because of the rapid rate of house price growth.

In fact, according to ME’s survey, 91% of respondents agreed that housing affordability is a big issue in Australia.

And this isn’t an issue confined to major cities or certain parts of Australia. In the past six months home values have increased in major markets across the country, and by significant margins in smaller cities like Darwin, Hobart and Canberra as well as regional areas.

Corelogic’s latest figures show that national home values rose by 7.8% over the past year, leading to a national median home value of $624,997 and even higher figures in markets like Sydney ($950,457), Melbourne ($744,667) and Canberra ($734,107).

Growth rates have been particularly strong in the first few months of 2021, with the 2.8% monthly increase in March the fastest level of growth since October 1988.

As a result, it appears some prospective buyers are starting to be priced out, including first home buyers.

The latest lending indicators released by the Australian Bureau of Statistics showed that while home loan commitments in general continued to grow in March, first home buyer commitments declined by 3.1% - the second straight month in which they’ve dropped.

Regional supply causing concern

Another one of the major issues troubling Australians is the rising concern about lack of housing supply.

Of those surveyed by ME, 60% believed that there isn’t currently enough choice or supply in the residential property market - up 17 percentage points on last quarter’s figure.

Interestingly, this sentiment resonated most strongly in regional areas. Nearly two in three regional buyers said that there ‘isn’t enough choice’, with the highest levels coming from those in regional New South Wales (71%).

That compares to 57% of metropolitan buyers who reported that there was not enough choice on the market.

“With more city dwellers moving to sea or tree change areas, supply is dwindling and adding pressure to prices,” said Mazzarella.

RELATED: Buying a home with a 5% deposit - scheme to offer more spots under 2021 Budget

Interested in reading more on the latest property news, including the newest measures to come out of the 2021-22 Federal Budget? Check out the Mozo home loans news hub for even more articles.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 473 home loans.
Last updated 24 June 2024 Important disclosures and comparison rate warning*
  • Basic Home Loan

    • Owner Occupier
    • LVR 90-95%
    • Principal & Interest
    Interest rate
    7.19 % p.a.
    Variable
    Comparison rate
    7.22 % p.a.
    Initial monthly repayment
    $4,747
    Go to site

  • Offset Home Loan

    • Owner Occupier
    • LVR 90-95%
    • Principal & Interest
    Interest rate
    7.19 % p.a.
    Variable
    Comparison rate
    7.43 % p.a.
    Initial monthly repayment
    $4,747
    Go to site

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR 80-95%
    Interest rate
    6.75 % p.a.
    Fixed 3 years
    Comparison rate
    7.09 % p.a.
    Initial monthly repayment
    $4,540
    Go to site

    Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR 80-95%
    Interest rate
    6.75 % p.a.
    Fixed 3 years
    Comparison rate
    7.30 % p.a.
    Initial monthly repayment
    $4,540
    Go to site

  • Basic Home Loan

    • Owner Occupier
    • LVR 90-95%
    • Principal & Interest
    Interest rate
    7.19 % p.a.
    Variable
    Comparison rate
    7.22 % p.a.
    Initial monthly repayment
    $4,747
    Go to site

  • Offset Home Loan

    • Owner Occupier
    • LVR 90-95%
    • Principal & Interest
    Interest rate
    7.19 % p.a.
    Variable
    Comparison rate
    7.43 % p.a.
    Initial monthly repayment
    $4,747
    Go to site

image of houses

Need help with refinancing?

You might have questions that need personal answers. We’ve teamed up with the mortgage brokers at Lendi to get you the answers you need, and a home loan deal you deserve.

Learn more

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.