First homebuyers take centre stage in Federal Election

It is hard to remember a time when the local apartment sector has had so many economic factors directly affecting demand and supply.

This is partly due to being at the tail end of a Federal Election campaign where both major parties have made the cost of living, particularly the challenges facing first homebuyers, the central pillar of their campaigns and policies.

For only the second time in the lead-up to a Federal Election, the Reserve Bank of Australia (RBA) chose to start returning interest rates and monetary policy, with a modest increase in the cash rate target by 25 basis points to 35 basis points.

The RBA board said it was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the COVID-19 pandemic, due to the economy’s resilience and inflation increasing to a higher level than anticipated.

The good news is the RBA board said there was evidence that wages growth was picking up and, given the very low level of interest rates, it was time to start the process of normalising monetary conditions.

The resilience of the Australian economy is particularly evident in the labour market, with the unemployment rate declining over recent months to four per cent and labour force participation increasing to a record high.

Both job vacancies and job advertisements are also at high levels and the unemployment rate is expected to fall to about three per cent by early next year, remaining around this level thereafter. This would be the lowest rate of unemployment in almost 50 years, according to the RBA board.

The modest increase in interest rates – from what was a record-low rate – should not result in large increases in the average mortgage repayment. It will certainly not make the typical mortgage payment higher than what many people are currently having to pay in rent, with lack of supply and high demand for accommodation remaining an issue for the local market.

I have said before that the main challenge facing most first homebuyers, including those looking to take advantage of the security, amenity and affordability of an apartment, is saving enough money for a deposit to qualify for a loan from the major financial institutions. The ongoing mortgage payments are much less of an issue.

This is why the Liberal-National Coalition and the Australian Labor Party have made helping people with a deposit their main policy driver. With the election campaign moving quickly, there is little point of me explaining the current policies, but I urge you to have a good look at what may be on offer after May 21.

Supply of available stock is another issue.

According to Urbis, at the end of last year, there were 972 newly completed apartments available, and this number would have reduced considerably by then with little, if any, new stock completed since that time and sales being steady in the first quarter.

These sales have been boosted by the return of investors to the market.

While Western Australia still has the highest owner-occupier to first homebuyer ratio in Australia for new financing (34.4 per cent) – still well above the long-term average – the latest Australian Bureau of Statistics figures for the March quarter show that investors have strongly returned to the market to be more than 20 per cent above the long-term average.