THE ADVISER - Jessica Darnbrough

The first home buyer market is expected to be the most active segment over the coming months.

Speaking to The Adviser, Century 21 chairman Charles Tarbey said first home buyers and first time upgraders will dominate the market during the traditionally hot spring selling season.

“Most activity will be in the first home buyer and upgrader segments. People that are looking to buy property under the $800,000 mark will be very active over the coming months,” Mr Tarbey said.

“Rents are rising but property prices, in many instances, are tracking sideways, which is in turn encouraging first home buyers to get their foot on the property ladder.”

Australian Property Monitors senior economist Andrew Wilson agreed and said the extended period of rate stability was helping to push first home buyers back into the market.

“Interest rates have been stable for about nine months now and, by all accounts, they will remain stable for the foreseeable future. When interest rates are stable or falling, the property market tends to attract younger buyers,” Mr Wilson told The Adviser.

But, according to Mr Wilson, it is not just interest rate stability that is encouraging young buyers to take the plunge.

“With little buyer activity and lots of properties for sale, its means there is less competition at the moment, which activates entry level buyers and first time change up buyers. In addition, incomes are rising and property prices are falling, which is helping first time buyers save their deposit quicker.”

“If you want to target a particular market, the best market to target is first home buyers because I believe they will be most active moving forward.”

Mr Wilson also said it was time for first home buyers to engage the market, as the market segment has been notoriously quiet for the past six months.

Data from the Australian Bureau of Statistics found just 7,481 home loans were approved for first home buyers in Victoria during the first four months of 2011.

This was the lowest number recorded over the same period of the year since 2004 and is 48.5 per cent less than the 14,529 first home buyer loans recorded over the first four months of 2009.

3% GENUINE SAVINGS FOR FIRST HOME BUYERS

Homeloans has joined the spate of lenders slashing fixed rates amid what one industry player has termed "global turmoil".

The lender has announced cuts from 40 to 65bps on its stable of fixed rate ProSmart products. The move will bring the product's one-year fixed rate to 6.84%, and its five-year rate to 7.44%.

Homeloans follows moves earlier in the week by CBA, Westpac, St. George and ING Direct. RateCity CEO Damian Smith commented that the raft of fixed rate cuts is unprecedented.

"Most lenders have been dropping their fixed home loan rates steadily this year, but we haven't seen this level of fixed rate movement since the global financial crisis. We saw 17 lenders that have dropped some of their residential fixed home loan rates this week alone; the average three-year fixed rate has hit a new low of 7.20% from 7.42% in December 2010," he commented.

Smith joined the growing chorus of predictions that the next RBA interest rate move could be downward.

"Fixed rate movements are generally good predictors of what lenders think will happen to interest rates, so there's obviously some possibility that variable rates might go down given the global turmoil," he said.

_{Adam Smith | 12/08/2011  AUSTRALIAN BROKER NEWS}