First time home buyers are searching for cheaper and smaller homes located further from city centres in their attempt to break into the housing market, according to a new survey.

The latest Mortgage and Finance Association of Australia (MFAA) research report also discovered an unprecedented shift in behaviour among renters, with an increasing number saying they are prepared to forego the lifestyle advantages of renting for the perceived security of buying.

“The financial crisis has changed the aspirations of home buyers, effectively downsizing the great Australian dream,” said Phil Naylor, CEO of the MFAA.

Mr Naylor reported that 47.9 per cent of first time buyers are now looking to purchase a cheaper property than otherwise intended due to a number of reasons including tighter lending criteria and concerns about the economy.

The MFAA/Bankwest Home Finance Index canvassed the opinion of 850 people on a range of issues relating to first home buyers.

Mr Naylor said first time buyers have resorted to a number of measures to enable them to enter the property market, such as looking for a smaller property (32.3 per cent) and seeking out an older property rather than moving into a new home (24 per cent).

“While Australia has the largest new home sizes, it seems first time buyers are turning their back on the McMansion dream and are looking at buying a home instead of a super-sized property that makes a statement about their lifestyle or prestige,” he suggested.

Another 31.3 per cent said they are looking for properties further from city centres, while 43.8 per cent of first time buyers are toning down their lifestyle and putting money aside in case the economy deteriorates.

The majority of renters feel rents are too expensive, leading many to feel they are in a rut. However, one in five remain content to rent to ensure their current lifestyle is not sacrificed.