First-home buyers need more than a rate cut, banks say

First-home buyers are still struggling to get into the market despite a surge in property interest after recent rate cuts.

The Reserve Bank in February announced a 25 basis point cut in the official cash rate — the first reduction in more than four years — saving the average borrower about $100 per month on their home loan.

The cut coincided with an abrupt turnaround in previously declining house prices, while major banks say it also led to an increase in mortgage applications.

“But it tends to be people who are already in the market, looking to refinance or to change property,” Bendigo Bank chief executive Richard Fennell told the AFR Banking Summit in Sydney on Tuesday.

“It is still really challenging for those wanting to enter the market for the first time.”

ING Australia boss Melanie Evans said new housing supply was a key issue for first-home buyers, but existing properties could also be used more efficiently.

Over two-thirds of the almost 11 million dwellings in Australia are standalone houses.

“Family homes that once housed four or five Aussies are now often resided in by a couple in retirement,” Ms Evans said.

“We should seriously use this opportunity to look at the disincentives when it comes to downsizing.”

Stamp duty on purchases acted as an obstacle to property sales, while the absence of inheritance or estate taxes in Australia also played a part in people staying put.

With owners incentivised to keep their homes for longer in a tax-free environment, Ms Evans said there was not enough turnover to accommodate first-time buyers.

“Listings are up a little bit this year, but they’re still eight per cent down on the five-year average,” she said.

“The stock just isn’t getting to the market.”

Innovative solutions were required to bring more first-home buyers into the property market, Commonwealth Bank executive Angus Sullivan said.

Modular, prefabricated homes that could be made in sections then transported and assembled on-site were a fast and affordable way to increase supply.

“If you can reduce the cost of building, you reduce the costs for first home buyers,” Mr Sullivan said.

For those who did not have a long-term partner or wished to otherwise join forces in buying a property, the bank also offers a “property share” option.

“I think that reflects some of the new thinking by young people to invest and rent out a property,” Mr Sullivan said.

But for those who already owned properties, a recent surge in mortgage applications pointed to rising buyer confidence, he added.

“We’ve got a lot of Australians who are looking at it and saying, an easy rate cycle is very likely going to move through to house prices,” Mr Sullivan said.