Is the tide turning for first home buyers?

It’s been a tough time for first home buyers (FHBs) in Sydney and Melbourne. With migration riding high and interest rates still near the floor, property values have risen with seemingly no end in sight over the last few years.

But, like Sam Cooke famously sang, “A change is gonna come”. And looking at the latest statistics, previously overheated markets could soon open up for first-time home loan applicants. Here’s why.

Sydney has hit the brakes

Every month, CoreLogic RP Data releases monthly indices that show changes in property values over the previous 30 days. While Sydney usually increases by 2-3 per cent over these periods, the May 2017 report showed a significant change: the New South Wales capital flatlined.

First home buyers could have some great property opportunities on the way.

Now, a 0.04 per cent reduction in values isn’t enough to magically make property affordable. However, this could be an indication that the market is slowing down, making investors less likely to take out a mortgage and continue pushing the market heat. It could be a break in the market, a prime opportunity for FHBs to make a purchase.

There are more available properties

Further insight from CoreLogic has compared the levels of supply in Australia’s capital to historic figures, and it paints a pretty picture for FHBs. Sydney, Melbourne and Brisbane all have (relatively speaking) better levels of housing supply than they normally have at this time of year – in some cases, the best in five years.

Research Analyst Cameron Kusher says that while this looks like more homes are being built, it is actually a reflection of lower demand. All the same, it provides FHBs with a greater pool of real estate to choose from once they get pre-approval on their mortgage.

Interest rates are still low

At the end of March, the Australian Prudential Regulatory Authority (APRA) announced new measures to supervise banks and other lenders, due to perceived risks for investment home loans (and in particular, interest-only loans).

While these steps were taken to make the market more financially stable, it also has the immediate impact of dampening investor demand. Interest rates on investor-specific mortgages went up by significantly more than owner-occupier home loans, leaving FHBs in a great position.

As the RBA holds the cash rate at 1.5 per cent and investors stay their hand, the market opens up to FHBs who were previously crowded out. If you’re ready to test the waters, make sure to get some help from your local mortgage broker.