Property Barometer - First Time Buying Slowing

According to the latest First National Bank’s Estate Agent Survey, first time home buying has slowed down mildly as the average buying age has risen in the first quarter of 2016.

The FNB report states that residential demand is still the driving factor behind housing demand, accounting for an estimated 21% of total home buying, although this was down from 26% from the previous quarter.

Normally percentage estimates can be volatile from quarter to quarter but the recent quarter’s estimates have remained below the multi-year high point of 28%, reached in the 2nd quarter of 2014.

This percentage nevertheless remains solid compared to the 12% low reached around
recession time back in 2008.

The sample of agents’ surveyed has pointed to a very significant percentage of 1st time buyers suffering from “buyer panic” in recent surveys. However, this percentage has begun to subside over the last 2 quarters, from a high of 54% in the 3rd quarter of 2015 to 48% of 1st time buyers by the 1st quarter of 2016.

On a 3-month moving average basis (for smoothing purposes), they identified an average 24,016 such transactions per month for the 3 months up to December 2016. This level is only around 39% of the boom time peak volumes late in 2003.

Therefore, this translates into a far lower absolute number of young buyers, and thus of 1st time buyers today compared to back in the boom times, even though as a percentage of total
volumes they may look reasonably strong.

Examining the total number of individual buyers below the age of 40, of which a sizeable portion would be 1st time buyers. Their numbers by late 2015 were only about 34% of that late-2013 highpoint.

 In the near term, a slow economy, rising interest rates and a slowing residential market, are expected to lead to further broad slowing in 1st time buying both as a percentage of total buying and in total volume terms, as well as leading to a further rise in the average age of home buyer. 1st Time Buyer Panic, too, is expected to diminish in significance. This is normal in toughening economic and interest rate times, with 1st time buyers normally being more cyclical as a group than the overall market, waiting on the sidelines in larger numbers in the tougher times, and growing in number more strongly than the repeat buyer group as times improve.

Read the full report here 

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