One of our values at 1Group Property Advisory is to add as much transparency to every property transaction as possible, and we enjoy speaking to all clients throughout their property journey. Helping First Home Buyers (FHB) though is especially enjoyable as they have that ‘first big purchase’ excitement.
There’s a definite slowing in the market, especially in Melbourne & Sydney and although bank lending conditions are changing (they’re more restrictive with everyone following ASIC’s review), first home buyers with a strong credit history and a ‘good job that pays good money’ (at least according to former Treasurer Joe Hockey) are sensing a bargain and coming back into the market; which is great news.
Like every property buyer, the biggest consideration is personal circumstances. Nonetheless, if you’re an FHB it’s important to consider the broader considerations.
Whether you’re a first home buyer or a seasoned investor, the deposit source is usually the toughest part of home ownership. Research suggests that the ‘bank of Mum and Dad’ now ranks as the 10th largest lender in the country, with 55% of the first home buyer market using this resource!
If Mum and Dad aren’t an option, you may have to beg (ask for a pay rise) borrow (lender’s mortgage insurance) or steal (lunches from the work fridge).
Or, failing these, you could consider taking advantage of the rise in house sharing in Australia and rent with others. If you’re saving for a deposit reducing your rent is one of the easiest ways to reduce your outgoings.
Once you do purchase your house, you can leverage off this rise by generating rent from your spare bedrooms and help pay down the mortgage.
All states and territories offer different first home buyer incentives and bonuses. These schemes may appear strong on paper, but it’s important to do your research. If you’re buying off the plan, builders and developers may put extra money on the contract price, knowing FHB have access to government funds. In these instances, an established property may be cheaper. If you’re looking at this option, look at your long-term strategy. Is a better suburb a better investment? You may be better of foregoing the grant and purchasing at a higher price point if it will give you improved capital growth.
While 1Group Property doesn’t specialise in finance, we can connect you with quality brokers and bankers, who’ll have your best interests front of mind.
A good financier can help educate you on the current state of the lending marketing and on the buying and financing process. They’ll take you through the often-forgotten costs such as stamp duty, solicitor’s fees, lender’s mortgage insurance, building & pest inspections, and any additional trade inspections so you won’t be hit with any unexpected fees or costs.
In our ongoing discussions with clients and peers, we have heard time and time again of investors who’ve lost money because they weren’t executing a fully fleshed out property strategy. Don’t get drawn into the ‘next boom suburb’ conversation, or the adage that Mum and Dad are always right, just because they think that, ‘property is the only way to go or rent money is dead money’.
Choosing a suburb is only one of the many aspects when it comes to choosing the right property. If you’re looking for more facts, seek out the opinion of experts.
Not all property types, in all areas, perform the same.
If you’re looking at purchasing an apartment, focus on smaller developments with 6-15 units with some land underneath the dwelling. Avoid high rise complexes, which generally have high body corporate fees and are easy to replicate.
Consider apartments with a unique character – art deco or warehouse conversion – or dwellings with outdoor space on the ground level.
Single level villas are a great entry level product and offer long term capital growth prospects. Look for ones that are close to local amenities, public transport, and good schools. When developers acquire land they’ll often build double story as it provides them greater margins, it also means that these days single levels are few and far between. Baby boomers who are looking to downsize will often be attracted to this style of property not only for their comfort (there are fewer stairs) but because of their scarcity.
If you’re considering purchasing a home, it is important to target suburbs with a high owner-occupier rate, homes with family-friendly floorplans and which are located within good school zones.
You could also take into consideration longer-term development scope, or the ability to extend or renovate once you have equity in the home.
1Group aren’t massive fans of off-the-plan (OTP) purchases or house and land packages. OTP can be risky; the dwellings are often in large developments and they’re usually in areas where supply levels for the same product are high. It’s important to remember, one of the key drivers of capital growth is scarcity. Read our article about why buying off the plan is a risky strategy here.
For the same reasons, house & land packages can be risky. If you do go ahead, make sure you spend time researching the builder and ask plenty of questions about what’s included and what isn’t. Be aware that we’ve come through a very good market, and developers are the ones setting the land prices, and they’re in it to make money.
Much like financiers, there are different levels of quality when it comes to solicitors/conveyancers and building & pest inspectors. While 1Group Property doesn’t have in-house services, we can connect you with quality independent businesses in this space.
We work with professionals who can either take care of the work for you or can guide you and educate you throughout the process.
And remember, Fear of Missing Out is a genuine emotion when looking at property. Don’t let it take hold. Can you wait eight months and save a larger deposit? This could give you access to a better investment! So, be patient, be diligent, and feel free to have a no-obligation discussion with 1Group Property Advisory.