Australia's property market is in freefall, with prices plummeting and first-time buyers hesitant to take the plunge despite falling prices. New data reveals that the number of new loans issued to first-time buyers has dropped sharply, from over 10,000 per month between October and March to a dismal 6,800 in May, according to the Australian Bureau of Statistics.
While the government-backed 5% deposit scheme had previously helped boost first-time buyer activity, credit agency Equifax reported a staggering 13.4% year-on-year drop in first-time buyer loan applications in May, with Loan Market observing a 20% fall in June compared to the same month last year.
The cooling trend is also evident in property prices, particularly for homes eligible for the 5% deposit scheme. Data from property insights platform Cotality shows that while prices for properties above these caps began falling in April, those below the caps started to decline in June, with first-time buyers seemingly spooked by the downturn.
At the higher end of the market, Sydney's top 25% of properties have seen a median price fall of around AUD 90,000 (approximately GBP 47,000) over the last three months, with similar trends observed in Melbourne and Canberra. The preference for fully renovated homes in this segment suggests increased buyer selectivity.
Investor demand has also slumped following the federal budget's restrictions on negative gearing for existing homes, with banks reducing investors' borrowing capacity by around 20%. National Australia Bank reported that investor lending rose at its fastest rate in a decade in May, but Westpac observed a fifth reduction in investor loans from the budget to mid-June.
The implications of these shifts suggest a challenging period for the Australian property market, with rising borrowing costs appearing to be a more significant deterrent than lower prices for first-time buyers. The Bank of England will be keeping a close eye on international housing market trends, including those in Australia, as it navigates its own monetary policy decisions amidst inflationary pressures and a cost of living crisis.