The number of Canberrans securing loans for their first home has plunged to its lowest level in more than two and a half years, as the housing market emerges as a key battleground in the final week of the federal election.
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Australian Bureau of Statistics figures published on Monday showed 146 lending commitments were made to first home buyers in the ACT in March, the fewest recorded in a month since October 2016.
The March result was the fifth consecutive month in which commitments for first home buyers has fallen in the national capital.
Economics expert and former federal Liberal leader John Hewson said the result was the product of stricter lender practices and a weakening economy, as he warned a pledge by both major parties to offer loan guarantees for first home buyers would not be "the magic pudding" they might hope.
But the Master Builders Association of the ACT has welcomed the scheme, arguing it will help young Canberrans break into the property market.
The bureau's data showed the rate and value of lending commitments to owner occupiers and investors has dropped back to 2016 levels, after a spike in 2017 and 2018.
Lending commitments for first home buyers peaked in January 2018, with 245 loans secured in that month. That number has dropped in the subsequent months before reaching the two and a half year low in March this year.
A total of 578 loans were secured for owner-occupier buyers in March this year, down from a high of 639 in October 2017.
The investor market has also softened, with the total value of commitments dropping from $135.2 million in January 2018 to $103.9 million in March 2019.
The downturn is being experienced across the country. The value of new commitments nationwide dropped 3.7 per cent in March, seasonally adjusted, with the largest falls in NSW and Queensland.
Dr Hewson, a professor at the Australian National University's Crawford Institute of Public Policy, said banks had "pulled back" on lending in the wake of the royal commission, which has led to a decline in loan approvals.
He said a number of economic factors were also making buyers more cautious about entering the market, including the rising cost of living, stagnant wage growth and house price volatility.
On Sunday, the Coalition launched an intervention into the market, promising to offer loan guarantees to first home buyers to allow them to buy properties with deposits of just five per cent - rather than the typical 20 per cent.
Labor quickly matched the promise, meaning the scheme will be introduced regardless of which party wins government at Saturday's poll.
Dr Hewson, who led to the Coalition to defeat at the 1993 election, said the public should be "very cautious" about the promise, particularly given its timing. He said the scheme would not be a "magic pudding", arguing only structural economic reform could address the factors which have locked so many prospective first home buyers out of the market.
"There are a long list of these sorts of schemes which have failed in the past," Dr Hewson said.
Master Builders Association of the ACT chief executive Michael Hopkins said the bureau's latest figures showed first home buyers were struggling to break into Canberra's property market.
In the ACT, lending commitments to first home buyers made up just 22 per cent of total loans, a far lower proportion than in the Northern Territory (42.9 per cent), Western Australia (36.9) and Victoria (30 per cent), Mr Hopkins said.
"First home buyers are becoming an increasingly vital driver of the Australian housing market, especially with investor activity so quiet, however many are locked out of the ACT market due to high land prices," he said.
Dan Jervis-Bardy
Dan covers federal politics from Parliament House, with a special focus on climate policy and the NDIS. He has previously reported on ACT politics and urban affairs since joining the Canberra Times in 2018.
Dan covers federal politics from Parliament House, with a special focus on climate policy and the NDIS. He has previously reported on ACT politics and urban affairs since joining the Canberra Times in 2018.
