In recent years, the Australian property market has presented numerous hurdles to first-time purchasers. Many people have been left wondering how they would be able to afford a home now that prices have skyrocketed in the last two years.
Some may believe that the market’s cyclical nature will take care of the matter. They believe that waiting for the prices to swing back into the red is the best strategy. While delaying a purchase may appear to be a wise plan, everyone who does so is making a tremendous – and potentially costly – mistake.
This is why…
Waiting for real estate activity to be favorable may be reasonable. Throughout 2021, property prices in most Australian cities grew significantly. First-timers have been caught dealing in a market where there is with limited supply and high demand. They believe that the home they desire is out of reach. Worse, they believe there is a chance of overpricing and patience could help them save.
So, while the reasoning is understandable, unfortunately it does not work that way. Perhaps the most important factor to consider is that the time spent in limbo is a wasted opportunity that will cost you more money.
There’s the never-ending tail chase of putting together a deposit, for example. To purchase a property, most first-time buyers will need a 20% deposit. Of course, there’s a dilemma, even if you’ve been saving away your money in the hopes of reaching that magic figure for your deposit.
It’s because growing house prices keep making that deposit grow in value.
A $130,000 payment was required for a $650,000 property you had your eye on in 2020. That identical home’s worth had risen to $800,000 by the end of 2021, corresponding to a $160,000 deposit. That’s an extra $30,000 just to get close to the starting line!
This leads to another reason why waiting isn’t a viable option.
If you had purchased that home in 2020, you would have amassed a substantial $150,000 in equity by 2021. A ready-to-use source of money for your future home or investment.
And, while house prices may have been on an upward trend, don’t be deceived into thinking they’ll reverse course. Although value growth will moderate this year, prices will continue to rise. This is supported by history. Property values in Australia have rarely retracted in any significant way, and when they have, it has only been for a short period of time.
Tips on buying your first home
- Lower your standards and expectations: Your first home isn’t going to be your last. It doesn’t matter if you have to buy a house that is a little smaller and a little further out of town. You might even come across a neighborhood that is undergoing development and has fantastic transportation alternatives. In fact, you could be in between of hotspots poised for explosive growth. These places can help you climb the property ladder, but you must first take the first step.
- Choose property that needs a little refurbishment: These properties might need some love because they require additional money to be invested on them. Homes that need renovation are by their own nature a little less expensive to purchase. Instead of purchasing a new home, look for one that has good bones and might be improved with a little elbow grease. These houses are always good places to start when it comes to building your investing portfolio.
- Take advantage of grants: There are programs that offer reduced stamp duty or first-time homebuyer aid. Check out what’s available and take advantage of it. If you aren’t sure how to benefit to these grants, check out our previous post on How can Australians benefit from a First Home Buyers grant. Purchasing your first house is an exciting experience that you should not put off. Taking the risk may seem daunting, but most buyers wish they had bought sooner and reaped the benefits in the long run. The key is to make sure the property you chose has the right basics and to act quickly to make it yours to avoid losing opportunity.
If you want to know what options are available for First Home Buyers, BOOK A CALL with our Professional Property Agent so they can present you a personalised solution to your needs.