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Is it a First Home Buyer’s Market?

April 16, 2021
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First Home Buyer's Market

First home buyer’s market

While a majority of people put their plans to buy property on hold in 2020 due to the uncertainty of COVID-19, the market has bounced back. With easing restrictions, auctions starting up again and government incentives designed specifically to help first home buyers get into the market, there is a mismatch between supply and demand at the moment. However, these factors don’t necessarily mean that it’s not a first home buyer’s market. Let’s take a look at all the considerations to determine whether or not it’s the right time for you to start your property journey.

Individual circumstances

Deciding whether or not it’s a good time to purchase a home will often come down to your personal situation at any given time. Sure, it’s important to consider the market and property trends, but in reality, your ability to repay a mortgage is the primary factor when a lender is determining whether or not to provide you with a home loan.

In July 2020, the Australian Bureau of Statistics (ABS) reported that the unemployment rate increased to 7.5 per cent with over a million people reported as being unemployed – that’s a lot of people without work! If you were one of the unfortunate ones to have lost your job, you may face a more challenging experience in obtaining finance. Although not impossible, it does mean you will need the right support and guidance to help you demonstrate your ability to comfortably repay your mortgage.

The size of your deposit is also a key factor. Currently, there are government incentives in place designed to assist more first home buyers to get into the market. While it’s great to take advantage of these offers, it’s also worth noting that the larger deposit you have, the more flexibility you have with your purchase options.

Government incentives to create a first home buyer’s market

As mentioned above, there are some current incentives that may help you to get into the property market sooner.

The First Home Owners Grant (FHOG) was created in 2000 to grow the housing property market by enticing Australians to build new houses, rather than buy existing properties, with a large lump sum payment.

Available throughout Australia, each state and territory has varying eligibility and criteria to consider.

If you’re purchasing in regional Victoria, you may just be in luck. The regional First Home Owners Grant currently provides a $20,000 payment for first-time buyers who sign a contract to buy or build their new home in regional Victoria where the contract or construction price is up to $750,000.

In addition to these offers, there are also stamp duty discounts, the first home loan deposit scheme (FHLDS) and the HomeBuilder scheme that you may be able to take advantage of.

These government schemes can potentially cut years off your savings, allowing you to get into your first home sooner.

Low-interest rates

Interest rates are currently at record lows which typically means lower home loan repayments.

While low rates may have you tempted, it is important to note they aren’t the only thing to consider when it comes to purchasing a home. Mortgages have different feature offerings, such as offset accounts and redraw facilities. Some of these features come with additional costs, so it’s worth considering these low-interest rates while looking at the bigger picture.

You also need to consider what would happen if the rates were to rise. Would you still be able to comfortably make your repayments?

Considering COVID-19

Things have changed in almost every aspect as a result of COVID-19. Thankfully, inspections are open again in nearly all states, but it’s worth keeping a close eye on this as there may be changes or cancellations if there are COVID-19 outbreaks.

Here are some things to consider in light of the current climate:

  • Lenders have tightened their lending criteria and now have an emphasis on job security.
  • Homebuyers may also have more buying power as some sellers may need to sell their property quickly due to their own financial downturn.
  • People are travelling less due to the current restrictions in place. As a result, the market may be more competitive, but don’t let this deter you.
  • While most people within the finance industry predicted a significant drop in house prices, the opposite has happened, and house prices are continuing to rise.

When it comes down to it, the question shouldn’t be “is it a first home buyer’s market?” It should be, “is it a good time for you to buy considering your current position?” There may be some challenges due to changing lending criteria or increasing property prices, but the reality is, there are always ebbs and flows with the property market. ABS data shows first home buyers are taking out mortgages at the highest rate since 2009. The important thing is to not get caught up in the fear of missing out, as well as managing your expectations and carefully considering your budget. Your first home is unlikely to be your forever home so while it’s important you find a home that fulfils your needs. But, it’s also important to be realistic and adjust your expectations if needed.

If you’re planning to purchase your first home in the next 12 months, please get in touch with one of our mortgage brokers for a no-obligation chat to see how we can assist you to achieve your property dreams.

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