Size of first-home buyers loans inflating

Size of first-home buyers&squo; loans inflating

THE average loan size for first-home buyers has risen by $52,000 - or 23 per cent - in the past two years, raising fears that the much-publicised government incentives for young buyers are artificially inflating the market.

A report commissioned by Brandmanagement, a market research firm specialising in the finance sector, says the average size of loans being taken up by young home buyers is jumping by an "unsustainable" amount, The Australian reports.

Drawing on Australian Bureau of Statistics figures, the report has found the average size of the loans rose by $11,400 in the three months to February, after rising 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.

The huge rise in the value of their individual loans in recent months has seen first-home buyers become an increasingly important part of the residential loan market.

The figures show that by February they comprised 26.9 per cent of that market: up from just 17.3 per cent in February 2008.

The actual number of first-home buyers also rose sharply in the year to February 2009: rising from just over 9000 to more than 14,400 in the year to February 2009.

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

Sydney couple David Halter and Kate Tulip, both 25, are among the thousands of first-home buyers who have entered the market - and taken on a sizeable mortgage - since the beginning of the year.

Last month they bought a two-bedroom apartment in Lindfield, on Sydney's north shore, and Mr Halter said the first-home buyers grant was a major factor in their decision to buy the flat.

But Brandmanagement's principal, Andrew Inwood, said the statistics - which indicate that property prices are rising in line with loan sizes - have raised questions about whether the government incentives were simply being used by consumers to buy into a bubble.