By Leith van Onselen

Today’s housing finance data released by the ABS revealed a worsening slump in mortgage demand from first home buyers (FHBs). According to the ABS, the number of finance commitments to FHBs nationally slumped to just 6,557 in December 2012, which is the lowest recorded level since February 2011 (see next chart).

The percentage of total owner-occupied finance commitments going to FHBs has also slumped, falling to just 15% nationally in December 2012, which is the lowest recorded share since June 2004 (see next chart).

At the state level, the slump in FHB commitments has been driven by big falls in New South Wales and Queensland, where FHB grants on pre-existing dwellings were axed in October 2012. Victoria, where FHB grants on newly constructed dwelling were wound-back in July 2012, has also taken a big hit over the past six months (see next chart).

Focusing on New South Wales and Queensland only, you can see that the number of FHB finance commitments have literally crashed, with commitments in both states running -50%-plus below the levels recorded just prior to when the FHB grants were extinguished in October (see next charts).

In fact, the number of New South Wales FHB commitments in December was the lowest in 21 years, whereas in Queensland it was the lowest since January 2011, when the state was affected by severe flooding.

You can also see from the above charts the sensitivity to fiscal incentives, with mortgage demand temporarily surging in response to the 2008-09 FHB Boost in the wake of the GFC, the expiry of FHB stamp duty concessions at end-December 2011 in New South Wales, and the recent October 2012 expiry of the FHB grant on pre-existing dwellings in both states. On each occasion, FHB demand has fallen away sharply following the expiry of these schemes.

Finally, the percentage of owner-occupied finance commitments going to FHBs also tanked in both New South Wales and Queensland – falling to just 8% and 12% respectively in December 2012 (see next chart).

Expect political recriminations to fly over first home buyers being ‘locked-out’ of home ownership, as well as increased special pleading from the property industry demanding that taxpayer funds once again prop-up the market.

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