Kelvin Davidson: Cotality Chief Economist on the increasing amount of home loans given with less than 20% equity

The housing market appears to still be in favour of first-home buyers, with more than half of loans this year done at 20% equity. 

Cotality data shows up to 60% of recent lending has been on a two-year fixed rate, up from less than 20% in November last year. 

In June, around 16% of lending went to owner-occupiers with less than a 20% deposit. 

Cotality chief economist Kelvin Davidson told Mike Hosking house prices have fallen so low, the risk of negative equity has pretty much disappeared. 

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Episode Transcript

Speaker 1 (00:00):
If there's a bright spot in our housing markets, the
old first home buyer who's having a dream time at
the moment. Latest numbers out this morning show over half
of them are buying these days with less than twenty
percent equity. In June, sixteen percent of all owner occupier
lending from those banks was below the twenty percent mark.
Kelvin Davidson's co telles his chief property economisties back with
there's Calvin morning.

Speaker 2 (00:19):
Good morning.

Speaker 1 (00:20):
How much of this is the quiet market and people
aren't borrowing, So therefore those who are i e. The
first home buyers look like they're getting a biggest slice
of the action.

Speaker 2 (00:30):
Well a tiny part of, say, I mean, so the
market shit has gone up, but we've also seen the
number of first home buyers go up to So yeah,
whether you're look an absolute or relative, that's very good time
to be a first home byer.

Speaker 1 (00:40):
They're having the conversation in Australia at the moment about
negative equity, and they've got lower deposit rates than we do.
Of course, if we got past that whole edgy Adrey
and all rage in which we need so much money
we can't get into a house in the first place,
and we're settling back down to what we once knew.

Speaker 2 (00:55):
Yeah, I think we are. I mean, the banks have
plenty of money to leand certainly at that low deposit,
all the OLVR rules have been raised and there is
a bigger allowance there. But also we've already seen house
prices fall so farther. I just think those risks of
negative equity have pretty much disappeared. You know, house prices
are unlikely for much further so, even getting on with
a low deposit, you're unlikely to go under water. I

(01:17):
suspect at this point.

Speaker 1 (01:18):
No exactly how much competition is there among the banks
to get money out there.

Speaker 2 (01:22):
At the moment, it's still pretty strong, I'd say. I mean,
we have seen I guess new lend volumes in other words,
they house purchased when people are moving around. We have
seen those volumes go up. But there's also a lot
of people looking to switch lenders, and cash backs are
still there. You know, competition is pretty intense. People aren't
just sort of sitting where they always have set. They
keen to look at other lenders. And yes, so there

(01:45):
is a battle going on in there.

Speaker 1 (01:46):
What about the psychology, I've been meaning to ask you
this for ages, So what's the current first home buyer?
Is it twenty seven ish? They're about to percent of
the market.

Speaker 2 (01:55):
Yeah, so on our numbers, so are pushing up to
twenty out or twenty nine. The average is twenty one
twenty two, so running well above average. And as I
said earlier, it's not just market share though, it's its
number of deals too. So your first time buyers are
still still keen. You know that mindset is still there.
It's not just financial there's non financial benefit, security of tenure,
all of that, and yet people are taking advantage at.

Speaker 1 (02:16):
The moment exactly. So the reason I asked the question
is at twenty seven percent is we think this is
a good news story and they're at record levels. And
if you remember what Eldanezy did with his tax treatment
the other day on houses in Australia, he goes, the
first time buying market's are thirty percent and that's not
good enough. So it's all how you interpret these things,
I guess, isn't it.

Speaker 2 (02:34):
Yeah, I guess so, And it depends on your sort
of long run averages what's normal for a particular market,
But certainly here where we're seeing first time buyers really
strong at the moment. That's partly down to the banks
and the money available, but also lowerhouse prices, lower interest rates,
just that mentality to still get on the housing leather
is still pretty strong. Despite sometimes you hear rhetoric about oh,

(02:55):
it's impossible, you can't do it. Actually, what we're seeing
in the first time buyers are being very successful.

Speaker 1 (03:00):
Right Calvin, nice to talk. Do you appreciate it very much?
Kelvin Davidson, who's with co Tellity. Do you know I
went and saw a house last week, very nice house,
except do you know what they had on the kitchen floor?
They'd redone the kitchen. This was a very nice house,
and I mean a very nice house. And do you
know what they've done on the floor of the kitchen,
brand new floor on the kitchen. Do you know what
they put their put in? Final? That was the end
of this retrod and that wasn't retro. It was cheap.

(03:23):
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