by Eliza Owen – CoreLogic – Head of Residential Research Australia
However, demand for housing finance across owner occupiers that are not first homebuyers (i.e., subsequent buyers defined as upgraders, movers and downsizers) appears to be fairly resilient in the rising rate environment.
Using ABS housing finance data to July, we can see how different buyer cohorts are reacting to the market downturn. Figure 1 compares the value of housing finance secured for the three main buyer classifications: first homebuyers, subsequent buyers and investors.
The chart shows housing finance secured by each group relative to April 2022, when national home values peaked. Since the rate tightening cycle started in May, investors and first homebuyers have seen much faster declines in housing finance secured than subsequent buyers.
This may be because subsequent buyers are less sensitive to lifts in interest rates. Using the sale of an existing home to fund their next home purchase, subsequent home buyers would likely need to take out less debt than first homebuyers, thus being less affected by rate rises.
Meanwhile, investors are likely to be more sensitive to a lift in rate rises. Although investors can offset the expense of higher interest rate payments as a tax deduction, investors are typically more leveraged than owner occupiers, and have inherently higher mortgage rates.
How have buyer cohorts behaved in the past?
Figure 2 (see below link to full article) looks at how lending volumes among the different cohorts have changed amid historic downturns since 2004 (where the ABS lending data series commences 2003).
The main difference between the buyer types over historic downswings is that first homebuyer demand for finance has traditionally been more resilient through downswings, with subtler declines in demand, and during some periods, increases. Subsequent homebuyers and investors have seen a more distinct decline in demand for housing finance initially through downswings.
For the full article see https://www.corelogic.com.au/news-research/news/2022/how-different-buyers-react-to-the-housing-market-downturn?utm_medium=email&utm_source=newsletter&utm_campaign=20220919_propertypulse