It’s hard right now to see what a post-pandemic property market will look like, but there’s one thing experts agree on – first-home buyers with a secure job should be house hunting right now.
This year kicked off with the First Home Loan Deposit Scheme enticing first-time buyers back into the market after years of little activity. Their greatest challenge at the time was FOMO brought on by increasing prices and a flurry of activity from investors.
What a difference a few months has made.
In today’s coronavirus landscape, the property market is in shock but the temperature could be just right for first-home buyers with all their financial ducks in a row.
“First-home buyers don’t like fast-moving markets. They can get put off by a hot market, but now there’s time for them to carefully consider their next move,” said Nerida Conisbee, chief economist with realestate.com.au.
“They also don’t like investors, because they often look at the same properties,” she said, referring to the sudden withdrawal of property investors spooked by the six-month coronavirus eviction moratorium (meaning tenants might avoid paying rent until the health crisis blows over).
Ms Conisbee said despite Covid-19, first-home buyer inquiry across realestate.com.au was up.
“It dropped between February and March, but it’s still up compared to the same time last year. It’s actually a good measure because it shows some kind of intent, not just clicks on a page. It’s people emailing agents about a property,” she added.
Cate Bakos, buyer’s advocate and president of the Real Estate Buyers Agents Association of Australia (REBAA), said first-time house hunters with solid employment should keep looking.
“It’s a great time for home buyers, including first-time buyers, if they are confident their income is sound. There are advantages in this market because there is less competition and some vendors are feeling a sense of urgency,” she said.
“Buyers shopping four to six weeks ago were finding competition was extreme. Confidence was really high and sale prices were well over expectations. Today’s vendors aren’t wanting to play things out for weeks in an effort to get a higher price. It’s obviously an advantageous period for anyone who knows what they want to buy and is in a position to do so,” she said.
Bessie Hassan of comparison site Finder.com.au said first-home buyers have never been better-placed to get finance and meet their mortgage repayments.
“Those first-home buyers might have missed out due to the price rises of 2019. They’ve probably already got their deposit, or close to it, and are in the perfect position to pounce,” she said.
“And we’re seeing fixed and variable rates at record lows. Six months ago we were saying if your rate doesn’t have a ‘three’ in front of it you’re paying too much, but now that’s been reduced to a having a ‘two’ in front of it,” she said.
Ms Hassan added that while the outside world looks scary right now, first-home buyers should try to focus on their individual circumstances.
“It’s a 30 year commitment and it’s probably going to be the biggest financial commitment of your life – and that’s regardless of the state of the economy. So do your own research and weigh up all your options before you sign on that dotted line. But what a great time to start when rates are low and borrowers are king. Banks want your business.” she said.
So what are the experts saying?
Less competition is a good thing for first-home buyers. It means the market isn’t sprinting forward and prices won’t be pushed up by keen investors with deep pockets. Traditionally (especially in the cities) investors and first-home buyers go for the same types of property in similar neighbourhoods, such as city-fringe units in palatable price brackets. Since the eviction moratorium, investors have cooled and the result is a quieter playing field for first-home buyers.
It’s never been cheaper to pay off a home loan. Many first-home buyers’ parents or grandparents took on mortgages with interest rates that soared as high as 17 per cent in the late 1980s and early 1990s, but today’s rates are rock bottom. CoreLogic data even suggests that more than a third of Australian properties had estimated mortgage repayments less than local weekly rents.
Even before the COVID-19 crisis, lenders had loosened their belts for first-time borrowers. By July 2019, APRA had relaxed restrictions around how lenders assessed a customer’s ability to meet repayments by dropping the required “buffer” from a minimum interest rate of 7 per cent, to 2.5 per cent. As a result it’s easier to get finance than it was even a couple of years ago. Couple that with a loss of interest from investors, and banks are very willing to chat with first-timers.
Let’s face it, a lot of sellers (some accounts say as many as 40 to 50 per cent) withdrew their properties from the market as soon as social distancing measures came in. Many were fearful of how property prices would fare in the coming weeks, or were scared of letting strangers wander through their home. But those sellers who are ready to sell (or have to) are now more prepared than ever to listen to offers.
Lockdown laws have changed the way real estate is to be sold for the foreseeable future, but government assistance for first-home buyers has stayed the same. Each state and territory government has its own version of the First Home Owner Grant (and exemptions to stamp duty) which can be found by visiting firsthome.gov.au. On January 1 this year, the Federal government kickstarted its First Home Loan Deposit Scheme, which assists eligible first-home buyers to get onto the property ladder with a deposit as low as 5 per cent. In the wake of coronavirus, the government has extended the 90-day time frame for finding a home to 180 days.
© Northpoint Mortgage & Finance
Credit Representative Number 488771/488913 is authorised under Australian Credit Licence 389328.
Your full financial situation and requirements need to be considered prior to any offer and acceptance of a loan product.