Much like Sydney, the Melbourne inner-city property market has skyrocketed in recent years, making it difficult for first-time buyers to break into the competitive market. Considering the Victorian capital has previously been hailed as the world’s most liveable city multiple years in a row—thanks to its cutting-edge culture and evolving infrastructure—it comes as no surprise that it has become a challenge to call a piece of real estate in the country’s second largest city home.
But, it certainly is possible. All you need is to be properly prepared, well-researched, and have a strategy. Read on for our first home buyer’s guide to the Melbourne property market to increase your chances of securing the keys to your dream home in this competitive property market.
STEP 1 – THE PROPERTY SEARCH PHASE
Get your finance sorted first
Get a recommendation for a good mortgage broker and get your finance application submitted and pre-approved before you even start looking. You will be devastated if you spend weeks/months searching for a property you love only to be told you are unable to obtain finance approval. Even worse, if you purchase at auction and your finance application is declined, you will lose your 10% deposit.
Consider surrounding suburbs
When we push some of our clients to understand why they want to buy in a particular suburb in Melbourne, the answer is generally because of it’s proximity to certain infrastructure or lifestyle features they desire. I.e. A client wanting to buy in Elwood might say proximity to both the beach and a village style shopping strip are amongst their top priorities. This means that they are not necessarily connected to Elwood, they are just looking for these features. Suburbs like Hampton or Sandringham both offer these attributes and you’ll get more bang for your buck.
Be realistic – it’s your first property!
Your first home does not need to be your dream home. Our parents started small and manageable and worked their way up, upgrading and upsizing their property as household sizes grew and when their finances permitted. Compromise, make sacrifices and start on the modest side. If you do this, you will have some surplus cash and be able to maintain a social life, as opposed to living on baked beans because you have a whopping mortgage to pay each week.
Location, location, location
You can never pick up your property and move it! Location is everything. If one property is aesthetically more pleasing and the other is a tad on the shabby side but in a great location – I would choose the latter. Every single time. A little bit of extra work now is nothing when it comes to a location that you will love for a lifetime.
Off the plan
Be cautious purchasing off the plan for your first home, particularly in Melbourne. We have a potential oversupply of units on our hands and our market is strong, so you will be paying top dollar. If the property falls in value by the time it’s completed and you don’t have the funds to pay the shortfall, it’s highly likely you will lose your 10% deposit.
STEP 2 – DUE DILIGENCE ON YOUR CHOSEN PROPERTY
Check and double check expenses and outgoings
For units, check the annual body corporate fees, sinking fund balance and the last body corporate annual general meeting minutes. This will give you an idea of what money is being spent on or raised for. For units, houses and townhouses, check what the council rates are each year. Understand what outgoings you will have to pay over and above your mortgage repayment.
Building and pest inspection
Get an independent building and pest inspection done prior to making an offer or attending the auction. Though it may cost you a few hundred dollars, $500 is well spent to give you peace of mind that the property is structurally sound and doesn’t require any major immediate maintenance.
Ask the Agent for a copy of the contract of sale and forward it to your conveyancer or solicitor to review prior to making an offer or attending an auction. They can check the conditions and make sure there are no title issues affecting the property.
Know what the property is worth
There are plenty of resources out there now to help you research what your chosen property is worth. Realestate.com.au now lists many recent sales in the area. Pick 5-6 properties that have sold within a 1-1.5km radius and compare them to the one you are looking at. Is the land bigger? How do the quality of fittings compare? How old is your property compared to ones that have sold recently? Comparing these features will allow you to add or subtract value and will give you a pretty good indication of what you should be paying. Don’t just take the agents list price as gospel.
STEP 3 – ATTENDING AUCTION OR STARTING NEGOTIATIONS
Don’t get caught up in “the game”
Everyone has a different opinion on this. However, I believe that every bidder turns up with a limit in mind. Most of the time it doesn’t really affect the result, whether you bid first or last. Relax, be confident and be prepared to pay up to 10k more than your budget or limit, it won’t affect the numbers in the long run.
Try to offer the best terms possible
In Melbourne, we still have the luxury of a good percentage of sales being offered by Private Sale or Negotiation. If this is the case, try to find out what the Vendors situation is. Have they already bought a new home? Are they under financial stress? Are they moving interstate? Are they about to have a baby? All of these factors can affect what terms will be appealing to them. We have been successful with many of our purchases not by offering the highest price, but by offering the most attractive terms (short settlement, no finance clause etc).
Offer prior to Auction
In my experience, around 30% of Vendors in Melbourne will consider offers prior to an auction. Always ask the question. If you are buying in a high demand area or the property has just come onto the market, you may be able to secure the property without having to deal with the stresses of Auction day.
While getting into the Melbourne property market today is more difficult than ever, it’s certainly not unachievable for a first home buyer. Doing a little bit of your own research and speaking to more seasoned experts can go a long way in securing your dream home without too much compromise.