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INTRODUCTION
- Scope
- Who is the target reader?
- How to use this report
BACKGROUND
- The buoyancy of the property market
- Australian property prices have rocketed
- The strength of the investment property market has been a driver of
the market as a whole
- First time buyers are a casualty of Australias love affair with
investment property
- The marginalization of first time buyers
- First time buyers accounted for less than 15 per cent of owner
occupied properties purchased in 2003
- The marginalization of first time buyers has been greatest in ACT
and Victoria
- First time buyers in South Australia account for a smaller share
of owner occupied properties financed than in any other state.
- In 2004 first time buyers share of the mortgage market fell to
new depths
- The dip in lending commitments to first time buyers reflects their
marginalization
- First time buyers have been confined to certain suburbs
- First time buyers now borrow almost as much as existing homeowners
- Those first time buyers that do enter the market are not always
buying owner occupied properties
- Government aid for first time buyers
- The First Home Owner Grant: means tests should be introduced
- Stamp duty concessions have been introduced to aid first time buyers
- ...but are stamp duty concessions the answer?
- A problem to be solved by various stakeholders
PRODUCTS FOR FIRST TIME BUYERS
- Products based on family support
- St George Family Pledge product
- Commonwealth Bank Family Equity Loan
- HomeStart Family Assist
- These products have received a mixed reception
- Consumer groups have been critical
- Many baby boomers want to spend their money on themselves
- Examples from the UK
- Bank of Irelands 1st Start mortgage
- Newcastle Building Societys guarantor mortgage
- Newcastle Building Societys Offset Family Savings feature
- Family offset mortgages are attractive because they involve a
smaller parental commitment
- Family offsets are a valuable acquisition and retention tool for
the lender
- Shared equity products
- The Wizard Head Start Shared Equity Loan
- A loan allowing borrowers to borrow up to 105 per cent
- Protection if house price increases slow
- A non-conforming product offered to conforming individuals
- Shared equity products are not easily structured
- Some consumers will be unhappy with the notion of sharing equity
- Examples from the UK
- The Mortgage Express Step Ladder
- Borrow 100 per cent but pay interest on 70 per cent
- A profitable product for Mortgage Express
- A product destined to confuse consumers
- This product must be distributed by face-to-face channels only
- Shared equity products in the UK have also been targeted at
retirees
- There are lessons to be learnt from the UK
- Other products appealing to first time buyers
- Preferential rate loans
- Targeted marketing is as important as unique product design
- 100 per cent loans
- First Permanent lends at above 100 per cent
- Liberty drops its 110 per cent product
- Mortgage Express offers the UKs highest loan to value mortgage
- Directed savings accounts
- Directed savings accounts can play a role in Australia
THE FUTURE DECODED
- Forecasting lending commitments to first time buyers
- Lending commitments to first time buyers will amount to AUS$25.7
billion in 2008
- Catering for first time buyers
APPENDIX
- Definitions
- AAGR
- CAGR
- Lending commitments
- Research methodology
- Primary research
- Secondary research
- Forecasting methodology
- Future readings
- Relevant links
- Datamonitors custom research capabilities
- SPP writing team
- How to contact experts in your industry
- List of Tables
- Table 1: Number of owner occupied dwellings financed by first time
buyers, 1999-2003
- Table 2: Dwellings financed by first time buyers as a percentage of
the total number of owner occupied dwellings financed, 1999-2003
- Table 3: Total lending commitments to first time buyers, 1999-2003
- Table 4: Macroeconomic projections underpinning Datamonitors forecast
of lending commitments to first time buyers
- Table 5: Forecast of lending commitments to first time buyers,
2004-2008f
- List of Figures
- Figure 1: Although property prices have leveled off in recent months
the increase over the last three years has certainly been dramatic
- Figure 2: In 2003 lending commitments for investment properties
amounted to AUS$75.9 billion, accounting for 38.4 per cent of total
lending commitments
- Figure 3: Since 2001 first time buyers have been forced out of the
property market to the extent that in 2003 they accounted for less than
15 per cent of owner occupied dwellings financed
- Figure 4: First time buyers accounted for a smaller percentage of
dwellings financed in all eight states in 2003 than in 1999. In Victoria
the percentage fell from 25.9 per cent to 15.2 per cent
- Figure 5: In the latter half of 2004 first time buyers returned to the
market. However, in October they still accounted for only 16.0 per cent
of owner occupied dwellings financed
- Figure 6: Lending commitments to existing homeowners have increased
markedly in recent years while lending commitments to first time buyers
have fallen year-on-year since 2001
- Figure 7: First time buyers have historically borrowed less on average
than existing homeowners. However, in the latter months of 2004 first
time buyers actually borrowed more
- Figure 8: The 1st Start mortgage enables an individual to borrow a
considerably larger amount than they could via a conventional mortgage
- Figure 9: Lending commitments to first time buyers will grow over the
period 2004-2008, accounting for 19.5 per cent of total owner occupied
lending commitments in 2008
- Figure 10: Datamonitors core consulting capabilities
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