General News

25 February, 2024

Good advice for first home buyers

UNDERSTANDING property market trends, the impact of investors and various first homeowner grants could be crucial before making a significant property purchase.

First home buyers should be aware of property market trends before signing on the bottom line.
First home buyers should be aware of property market trends before signing on the bottom line.

First home buyers are facing an increased number of challenges in purchasing their first property. In 2023, housing affordability declined, making it more difficult for first time buyers to purchase property in the Australian market. 

This was driven by a simultaneous surge in both housing and rental values, coupled with a rise in interest rates, as highlighted in a recent report by ANZ and CoreLogic. 

It was also revealed that saving for a 20 per cent deposit would now require saving for a substantial average of 9.7 years. 

“While first time home buyers encounter numerous challenges in acquiring their initial homes, it is crucial to be well-informed about the optimal timing for making this significant purchase when the opportunity arises,” says Professor Peter Swan, School of Banking and Finance at UNSW Business School.   

“Purchasing property without knowing the market could lead to first home buyers having challenges in making their mortgage repayments.” 

Prof. Swan and Dr Nalini Prasad, a Senior Lecturer in the School of Economics at UNSW Business School discuss the current property market and the best times to buy for first homeowners. 

When is a good time to buy your first home? 

Prof. Swan: “A good time to buy is when house prices are relatively depressed, and you are capable of raising the deposit and meeting interest payments on your loan.”

Dr Prasad: “Typically, individuals used to find work, get married and buy a house to raise kids in. But house prices have increased, requiring more years of savings – and often two incomes - to purchase a house. 

“This has increased the age at which individuals buy their first house to 36. People need to have enough savings to get a deposit for their house, but this is hard to do when prices are rising faster than incomes.

“A good time to buy is after people have built up savings, when interest rates are low and when house price growth is cooling.”

When do you think housing prices will start to decline? 

Prof. Swan: “Housing price changes are very much economy-dependent and exceedingly hard to predict. Inflation rates remain well above Reserve Bank guidelines of 2-3%. Should the Reserve Bank continue to raise interest rates to precipitate an economy-wide decline, combined with a fall in new immigrant arrivals, then we could see a decline in house prices.” 

Are there any patterns in the property market that first home buyers should look out for?  

Prof. Swan: “First home buyers should be wary of buying into a rising market with a combination of high inflation and rapidly rising interest rates, as such a combination may lead to recession and rising unemployment.

“Vulnerable first home buyers may be squeezed and unable to meet their repayments with their property being repossessed. This happened during the Global Financial Crisis. 

“More stable markets with the absence of inflation and less prospect of a recession better suits low-income first home buyers. “

Does the current market make it better for first home buyers to continue renting or purchase property?  

Dr Prasad: “At the moment, rents are increasing which makes buying a property more attractive. In some cases, rentals could become more expensive than mortgage repayments.

“House price growth is also moderating in Australia which is helping to offset part of the effect of interest rate increases on the amount that people can borrow.”


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