Owning your own home, whether an inner-city apartment or a house and garden in the suburbs or the country, remains the great Australian dream. But many first home buyers, disheartened after missing out at auction after auction, are worried that dream may be out of reach.
Recently dire warnings that first home buyers are being priced out of the market have dominated the media, no doubt increasing fears they will be renting forever. But it need not be so.
Cheaper Home Loans Mean Easier Repayments
With interest rates at a record low –the Reserve Bank cash rate is just 2.5 per cent – borrowing is cheaper . As well, many banks are now willing to lend a higher proportion of the purchase price and in some suburbs prices are still below their peak. That means first-time buyers can get started on repaying their mortgage while repayment levels are low.
A recent realestateview.com.au buyer survey found 72 per cent already owned their home and the other 28 per cent wanted to buy soon. For some of those not yet in the market that will mean competing with investors for the same affordable properties. And investors have the advantage of equity in their existing assets, while first home buyers are just starting to build equity.
Strong Investor Interest Competes with First-Time Buyers
The Australian Bureau of Statistics has found renewed investor interest in the Australian market is gaining pace. Its new housing finance data showed the value of investment housing loans rose by 5.2 per cent, seasonally adjusted, in September. REIV analysis also shows that investors have returned strongly into the market.
With the Melbourne median house price having risen by almost 9 per cent (seasonally adjusted) in the September quarter, this investor interest could also push up Melbourne house prices in more affordable suburbs. In fact it seems likely competition with investors in the first home buyer price range of $300,000-$450,000 is at least partly responsible for those headlines statistics showing the proportion of first home buyers in the market at its lowest level – just 12.5 per cent, compared with 13.7 per cent in August – since the ABS began keeping those records 22 years ago
Add to this the Reserve Bank’s September warning that the trend for speculative property investment by SMSFs could inflate property prices. Such investments have been heavily promoted after legislative changes allowed SMSFs to borrow money to invest in property.
Research and Planning the Keys to Your Affordable Dream Home
So this may seem to add up to mostly good news for investors but a lot of bad news for first home buyers. And yes, there are affordability concerns, there is competition with investors. But there is no need for this to force first home buyers from the market. There are still great affordable properties to be found – if you know where to look.
The key is research and, thanks to the Internet, this is much easier than it used to be in the days of looking in real estate agency windows.
Where do you want to live? Find the kinds of homes you want online, then attend the auctions to see what they sell for. Get to know the local agents and talk about what is available and what you can afford. Median prices for each suburb are available free at reiv.com.au/Property-Research/Median-Prices.
If your preferred suburb seems beyond reach can family help you raise a larger deposit? Would budgeting mean you can pay a little more? How about considering property one suburb further out – near your preferred area, but cheaper.
Go to soldtoday.com.au and sign up for our free weekly media alerts. This is a great new REIV service through which you can receive auction results for your chosen suburb or suburbs in Melbourne, or Sydney or both every Saturday night – before everyone else. No more waiting until the next day’s newspaper.————————————————————————–