Biggest barriers for first home buyers revealed

Saving enough for a deposit a large constraint, says LMI provider

Biggest barriers for first home buyers revealed

Affordability remains the biggest barrier for those aspiring to own their own home, with saving a deposit coming in second, according to a July survey commissioned by Helia.

Alternative pathways to saving a deposit, purchasing property with less money, or shared equity property ownership are poised to grow, findings showed.

Formerly Genworth Mortgage Insurance Australia, Helia, a lenders mortgage insurance (LMI) provider, commissioned CoreData to survey 2,108 prospective first home buyers and 1,187 recent first home buyers across Australia. It sought to discover buyers’ top barriers and motivations, their sentiment around homeownership and their changing behaviours and perspectives, publishing the findings in its annual First Home Buyer report, released in November.

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Cited by just over two-thirds of first home buyers (68%), findings showed affordability to be the leading barrier to homeownership, followed by saving for a deposit, cited by 60% of respondents, who said living expenses constrained their ability to save.

Results also showed that over half (54%) of recent first home buyers used a mortgage broker, which Helia said had increased from 46% the previous year.

Mortgage brokers were the most popular source for recent first home buyers to find out information about loan options (44%), ahead of consulting family or partners (33%) and lenders at their main financial institution (25%), Helia said. Many recognised the value of the information provided by mortgage brokers, with 31% saying they would meet with a mortgage broker referred by a friend.

The most common approaches used to fast-track property purchases were to reduce lifestyle expenses (cited by 48% of respondents), and to wait for prices to fall further (45%), Helia said.

Only a quarter (25%) of first home buyers aimed to save a deposit of 20%, down from 41% in 2019, Helia said. Over the same period, findings showed use of lender’s mortgage insurance (LMI) rose from 36% in 2019 to 71% in 2022, it said.

Helia CEO Pauline Blight-Johnston (pictured above) said the impacts of housing affordability, higher interest rates and rising inflation were evident in the research.

“Our findings show that saving for a home is feeling increasingly out of reach for more Australians – with  only one quarter of first home buyers now feeling they can achieve a 20% deposit  – making it clear more pathways are required to serve this important part of the market,” Blight-Johnston said.

Findings showed the first home buyer market had started to diverge into two distinct groups. The first were higher earners who may be able to call on family support, who consider falling prices a buyer opportunity. The second group were younger first home buyers living in regional areas or who did not have family support, who felt at risk of being left behind, Blight-Johnston said.

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Uptake of the first home super saver scheme (11%), rentvesting (8%) and shared equity schemes (6%) was low among recent first home buyers, results showed. However, significantly more prospective first home buyers said they were likely to consider these strategies and others, Helia said.

The proportion of first home buyers who thought it was a good time to buy dropped from 67% last year, to 57%. Those who thought it was a good time to buy were more likely to be over the age of 40 years, based in metropolitan areas, and from households earning $250,000 plus per year, Helia said. Access to family assistance and those who intended to hold a property for less than two years were also contributors to positive buyer sentiment.

Blight-Johnston said LMI was increasingly used by Australians to help them enter the property market sooner. Helia is developing new solutions to meet this growing need, she said.

“Given many first home buyers are motivated by the long-term financial benefits of homeownership and are keen to avoid rising rental costs, we expect to see more emerging strategies and pathways being considered by the new generation of home buyers,” Blight-Johnston said.