RBA warns first home buyers to hold off
Article by Rebeccah Elley
RBA head of financial stability Luci Ellis, at a speech to the Residential Housing Conference, has warned first home buyers against overstretching themselves in order to buy a property.
Ellis said that even though interest rates have fallen, first home buyers will find the market binding, compared to trade-up buyers and investors, resulting in a “squeezed out” feeling.
“This is probably more a cyclical phenomenon than a structural one. It is still probably quite disheartening for potential first home buyers. As such, it would not be a good outcome if they responded by overstretching themselves to try to get into the market during upswings.”
First home buyers “overstretching” themselves to join the busy housing market would be a risk to the financial system and against first home buyer’s own long-term interest, Ellis said.
The past 15 years has seen housing prices increase faster than Aussie incomes, that transition is now slowing and has started to cycle in a slower trend. Ellis said, “as experience overseas has shown, you do nobody a favour by trying to solve an affordability issue by making it easier for people to borrow more than they can reasonably service. “
Ellis said she is hopeful that Australia's urban structure can evolve to offer better choices and greater financial stability. “This might require some changes to the way we plan, build, and live, as well as ongoing prudence in how we borrow. But looking at how much has changed in the past decade, I do believe that it is possible.”
Saving for your first property? Get a high interest savings account to pump your savings into gear by visiting Mozo’s saving hub here.