First home buyers loans on the increase

Is it possible that the much publicised government incentives for young buyers is artificially inflating the market as the average loan size for first-home buyers has risen by $52,000 - or 23 per cent over the past two years?

The Australian has reported that a recent report commissioned by Brandmanagement a market research firm specializing in the finance sector, has found that the average size of loans being taken by young home buyers is increasing by an unsustainable amount.

Australian Bureau of Statistics figures has found that the average size of loans rose by $11,400 in the three months to February, after having risen by $18,100 in the three months to November. In total, the first-home buyer average loan size jumped by $52,000 to $280,600 in the two years to February.

First-home buyers have become an increasingly important part of the residential loan market since the huge rise in the value of their individual loans over the past few months.

Figures have shown that by February they comprised 26.9 per cent of that market up from 17.3 per cent in February last year. The number of first-home buyers also rose sharply from over 9000 to more than 14,400 in the year to February 2009.

The Federal Government's First Home Owner's boost scheme - which currently provides up to $21,000 for new homes and $14,000 for established homes - is slowly being phased out, and, will cut out altogether after the end of this year.

Andrew Inwood Brandmanagement's principal said that statistics have indicated that property prices have risen in line with loan sizes - but has raised questions as to whether the government incentives were simply being used by consumers to buy into a bubble.