In a report by QBE Lenders Mortgage Insurance, median house prices in all major Australian cities are expected to incur double-digit growth until June 2012. This growth includes a 19 per cent rise in Melbourne.
However, first home buyers are not the ones to be blamed for they take up less than 10 per cent of all house purchases. Also, first time buyers are price-sensitive for they tend to borrow a big chunk of the purchase price as compared to returning home buyers who have more equity.
Many first home buyers worry that they might pay their mortgage should prices arise as well. They also purchase at the lower end of the market that a rise in their property value does not shake up the median price movements.
If for example, a novice buyer bought a $300,000 house that has a yearly property value increase of 7 per cent, the $21,000 increase barely affects the median price.
On the other hand, investors account for 30 per cent of property buyers for their cash flow is based on negative-gearing taxes and rental income. Usually, they tend to purchase within the middle of the market. Thus, their transaction put more weight on the median value.
For example, an investor bought a $500,000 property with an annual growth rate of 7 per cent, it will incur a $35,000 value hike after a year. And because investors take up a large portion of the property buying market, their deals dictate median price growth.
Returning home buyers should shoulder the blame to for they make up 60 per cent of the market. And since they have equity to show for, they have the capacity to buy middle or upper-priced properties.
If a returning buyer bought an $800,000 property with a 7 per cent annual growth, the property becomes more expensive by $56,000 after a year. This growth is three times bigger than what first home buyers can achieve from a $300,000 property.
For information on the first home buyers grant, or to apply for a first home loan then click here.
