22/08/2022
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THIS MIGHT BE THE FIST HOME BUYERS BEST CHANCE TO CRACK THE MARKET IN YEARS
Article from Realestate.com.au
This might be first-home buyers’ best chance to crack the market in years
Vanessa De Groot, Property journalist
First published 28 Jul 2022, 10:53am
The FOMO-driven property market surge seen over the past few years is behind us, for now at least, with many would-be buyers sitting on the sidelines.
But for those Australians dreaming about getting into their very first home, this could actually be the best time in years to get into the market.
Buyer competition is easing as rising rates and uncertainty surrounding the market keeps many away, while at the same time supply is on the up, prices are slipping in many areas, and grants are flowing.
Property Outlook: Falling prices to continue into 2023
On top of that, from January, first-home buyers in New South Wales will have the option of choosing to pay a property tax for homes valued at up to $1.5 million, rather than forking out a huge upfront stamp duty cost.
While the one drawback is rising interest rates, the Reserve Bank’s current cash rate of 1.35% is still historically low.
So, it raises the question…
Is now a good time to buy for the first time?
There will be some good opportunities for first-home buyers to get a foothold in the market over the next six to 12 months, according to Real Estate Institute of Australia President Hayden Groves.
Buyers in the market right now have more choice, less competition, and lower prices. Picture: Getty
With labour and materials shortages continuing to plague the residential building industry, the established housing market is where those first timers should be looking, Mr Groves added.
Overall, the property market is more stable now than it has been over the past few years, with prices having moderated and buyers less active, he said.
That is likely to be the case until some of the inflationary pressures in the economy start to abate.
As a result, there’s reduced competition and greater choice for first-time buyers, with the potential for price discounts.
“We’re not seeing first-home buyers having to compete with 15 or so other buyers, so they can afford to be more discerning over the next six to 12 months,” Mr Groves said.
“We still have very low supply levels for housing stock in most areas around Australia, but spring often brings more stock to the market, as it’s typically when most people start to get on the move.
“That means buyers will soon have more choice.”
There are plenty of good opportunities on the horizon. Picture: Getty
The market is already starting to see a rise in listings, with the latest PropTrack Listings Report finding markets around the country had a busy start to the usually quieter winter period.
While new listings on realestate.com.au nationally were down 3.1% month-on-month in June, they were 8.5% higher than at the same time last year, and it was the fastest June for new listings nationally since 2011.
The report also found there had been more new listings nationally across the first half of the year than during any year since 2015.
Days on site have also risen, according to PropTrack data, with properties taking a little longer to sell, while sales levels have fallen, indicating buyer demand has moderated.
Home Buyer Academy co-founder and Property Pursuit director Meighan Wells said the fear of missing out so many buyers had during the “recent racing market” had gone, with first-home buyers now enjoying the benefit of more time to make big decisions.
“FOMO can take away the feeling of control and lead to rushed decision making and poor choices,” Ms Wells said.
“But with a bit more time, buyers can settle, breathe, and be more considered. This does not mean first-home buyers can get too fussy – you are looking for the imperfectly perfect home within your budget, not the unicorn.
“But it is a great opportunity for first timers to move forward with a bit more time to conduct thorough due diligence.”
PRD chief economist Dr Diaswati Mardiasmo added that combining the many grants and incentives currently available for first-home buyers, both at a national and state level, can add up to a considerable chunk of money.
State incentives include first-home buyer grants, stamp duty concessions, and low-deposit government-issued loans.
Nationally, there are schemes enabling buyers to get into market with a lower deposit through a government guarantee, as well as the Help to Buy shared equity scheme.
Should first-home buyers wait for prices to fall?
Australian house prices have fallen just 0.55% from their peak in March this year, with bigger falls in Sydney and Melbourne, which are down more than 1.5%, according to the latest PropTrack Home Prices Index.
Mr Groves said prices will continue to stabilise in most parts of Australia until inflation and rate rises begin to level out, which is another plus for first-home buyers.
But while there may be a correction in prices, markets aren’t likely to experience the huge falls as predicted by some, so first timers shouldn’t be waiting for a crash, he said.
“If anyone is waiting for a market where supply is outstripping demand, I don’t think that market is coming anytime soon, particularly when we are going to have more migration coming into Australia.
“We haven’t been building a lot of houses in recent times. We still have a shortage of supply.”
24 hours ago
Despite some doom and gloom, now could be the best time in years for first-home buyers. Picture: Getty
Dr Mardiasmo said the biggest advantage for first-home buyers in the current market was that they can invest equity into a low supply market that can grow over time.
Unless the government can inject an effective amount of supply into the market, prices are likely to increase in markets within 20km of capital cities, she said.
How should first-home buyers proceed?
Experienced investors have a counter-cyclical mindset to buy property when others are not, and there is an opportunity now for first-home buyers to do the same, Ms Wells said.
“It is about having the courage to go against the mainstream sentiment and tread your own path,” she said.
“A slowing market creates opportunities for negotiation where previously there has been too much competition.
“The most important part of this for first homebuyers is to ensure that they are only buying A-grade properties and paying the right price.
“Pricing property in a declining market is really tricky, get that wrong and you will have really overpaid.
“It’s also important to remember that there is no ‘single’ property market. Each property in every location has to be assessed based on its own fundamentals and market conditions.”
The risks for first-home buyers remain the same regardless of the direction of the market in the area they are buying in, Ms Wells said.
“Quality, due diligence, and correct pricing must always drive decisions,” she said.
“But as the mainstream buyers retreat and wait to see what happens, this presents opportunities for buyers who are educated and prepared.”
Competition is easing, meaning buyers in the market can take their time. Picture: realestate.com.au
With interest rates still rising, first-home buyers are encouraged to leave “some in the tank” – that is, don’t borrow the maximum amount possible, Mr Groves said.
It can be a great thrill to buy your first home but that can sour quickly if you can’t afford the nice things you’re accustomed to doing, particularly as the cost of living rises, he said.
“You don’t have to get everything all at once in your first home. Use it as a steppingstone into upgrading as your circumstances and budget change.
“I encourage first-home buyers to exercise caution as to how much pressure they put themselves under financially when buying their first home.”
Despite some doom and gloom, a combination of factors might make this the best shot first-timers have had in years to buy up a home.
