Australians are ignoring a lot of the negative economic news that’s around at the moment and are becoming more confident about the medium to long-term prospects of the housing market, with the dream of home ownership still alive and well.
New research from the nation’s second-largest bank finds that 44% of Australians plan to buy a new home in the next five years.
That’s an increase of 9% since July last year.
Westpac’s latest Home Ownership Report also finds that there have been significant rises in the number of people planning to buy an investment property (+6%), those planning to “upsize” or move to a bigger home (+4%), and those planning to renovate their existing dwelling (+4%).
However, the research uncovers a different story when it comes to first-home buyers, recording a 3% decline in the number of people who say they’re planning to achieve home ownership in the next five years.
First home buyers - it’s tough, but we’re willing to make sacrifices
86% of potential first-home buyers also admit recent cost-of-living pressures have delayed their home-buying plans.
That’s not surprising.
Recent research by REA group’s PropTrack shows that with interest rates at their highest point in more than a decade, median home affordability is at its lowest level in 30 years.
However, Westpac’s Home Ownership Report found potential first home buyers were “getting creative and becoming more open to compromises to break into the market."
Westpac says more than half (56%) of these potential buyers are planning to buy with their current partner (+16%), three quarters (75%) are willing to buy somewhere they weren’t previously considering (+9%), and half (50%) are considering ‘rent-vesting’ to achieve home ownership.
Almost half (47%) also said they were willing to pay for Lenders Mortgage Insurance (LMI) to get into their first home sooner without the usual 20% deposit.
“There’s still an underlying determination among Australians to become property owners, but they are having to adapt and compromise in their plans in order to achieve that,” says Westpac Senior Economist, Matthew Hassan.
His colleague, Westpac’s Managing Director of Mortgages, Damien MacRae, agrees.
“They understand it’s a big task, but they are determined to break into the market and are willing to compromise to get there.
“Buyers are casting their expectations wider, willing to compromise on location and are forgoing everyday luxuries like food delivery.”
“They are also more inclined to relocate and move to apartment living,” Mr MacRae says.
The rise of the apartment and townhouse
Westpac’s research found that while most Australians aspire to own a house, this has decreased by 5% since 2021, while apartments and units have jumped by 7%.
Preferences for townhouses have doubled, while interest in house and land packages has quadrupled.
Westpac Senior Economist Matthew Hassan says the price premium for detached houses has blown out in the major cities over the last couple of years, putting them out of reach of many, while price growth in apartments and units has lagged.
“We’re starting to see a shift back towards that (apartment) market, because if you’re really facing difficulties with affordability then the more affordable dwellings now are units by a long way,” he says.
Head of Mortgages Damien MacRae points to the unwinding of the COVID-19-era quest for a “sea-change” or “tree-change”.
“During the pandemic, we saw more buyers seeking property further from the city in pursuit of more space, however, it appears buyers are willing to concede on location in order to get a foot in the door,” he says.
More generally, Mr MacRae notes that while people are more confident about the housing market in the longer term, Federal and state governments, businesses and other stakeholders will have to start delivering on their housing commitments to maintain that confidence.
“While it’s promising to see buyer confidence returning with growth in the medium to long-term plans, this underscores the importance of addressing the challenge around (housing) supply shortages,” he says.