FIRST home buyers are among those feeling the brunt of worsening housing affordability, according to a new report.
Loans to first home buyers in NSW fell by more than 20 per cent over the last quarter, according to the Real Estate Institute of Australia (REIA)'s latest Housing Affordability Report.
The number of loans to NSW first home buyers decreased to 4,603, which represented a fall of 20.7 per cent over the quarter and 27 per cent over the past year.
Mortgage broker Peter Byrne, from Mortgage Choice Newcastle, agreed that there had been a significant drop in the number of first home buyers applying for loans in the past six months.
"We have seen a big change in business," Mr Byrne said.
"In the past, 50 to 60 per cent of my business has been first home buyers but that has switched across to refinancing and re-fixing loans.
"First home buyers are only accounting for around 15 per cent of our business at the moment."
Rising interest rates have also reduced overall demand for new home loans, according to the report.
On Tuesday, the Reserve Bank of Australia lifted the cash rate to an 11-year high of 4.1 per cent.
Mr Byrne said reduced borrowing capacity due to rising interest rates and the increased cost of living was also affecting first home buyers.
"Let's say that for the average person borrowing capacity went down $20,000 to $30,000 with every rate rise," he said.
"That does make a huge impact, particularly on whether it's a single applicant going for a loan for the first time or a joint applicant.
"The other thing lenders look at is living expenses, so that has obviously been going up with the cost of living and inflation."
Merewether first home buyer Elanor Knight is one of the lucky ones who gained pre-approval for a loan prior to the first of 12 interest rate rises since May 2022.
Ms Knight said she had noticed a shift in the volume of other first home buyers in the marketplace in the 12 months since she began her search for a property with a budget of $650,000.
In May, she secured a two-bedroom unit in Merewether for below the advertised price.
"It just didn't seem so competitive [compared to last year]," Ms Knight said.
"This time around, of the four places I went to inspect, there was no one around, so I didn't feel like it was a competition.
"I feel like it alleviated a lot of the stress for me knowing that I was the only one and so even though interest rates are going up, I got it for a good price."
Of the total number of Australian first home buyers who purchased during the March quarter, 21.8 per cent were from NSW had an average loan of $586,770, according to the report.
This was an increase of 1.4 per cent over the quarter.
Overall, purchases by first home buyers fell across the country.
Over the March quarter, the number of first-home buyers decreased in all states and territories with Victoria recording the largest decline at 24.1 per cent.
REINSW CEO Tim McKibbin said the crisis was being felt across the board with owner-occupiers, investors, renters and first home buyers as both housing affordability and rental affordability declined in the March quarter.
"While housing affordability has declined significantly on a national basis, buyers in NSW are being impacted to a disproportionate extent," Mr McKibbin said.
"The REIA research shows housing affordability Australia-wide has declined by 11.6 percentage points over the past five years, 10.3 percentage points over the past 10 years and 14.2 percentage points over the past 20 years.
"But in NSW, the decline is 16.9 percentage points over the past 5 years, 16.5 percentage points over the past 10 years and 19.3 percentage points over the past 20 years."
