First home buyers- Is now the best time to buy?
With the skyrocketing cost of living alongside rising interest rates, it is no surprise that the number of first home buyers looking to buy their first home has nearly halved since the peak seen in 2021, according to the latest ABS Lending Indicators Data.
If you are a first home buyer, you might wonder what this means for you, and whether now is really the perfect time to be navigating the real estate market?
Why have first home buyers left the market?
The recent increases in interest rates have meant that some buyers are now priced out of the property market because their serviceability (meaning their ability to repay a loan) has lowered, and they are now unable to afford to buy a property.
Whilst some other buyers are choosing to sit on the sidelines and see what happens in the markets because they are scared and uncertain of how high interest rates will rise. These buyers are questioning whether owing a property will be affordable for them with the high cost of living.
If you have a stable job, a good amount of savings, and a pre-approval to purchase a property there is no reason you need to wait on the sidelines if you are sensible about your budget and understand what you can realistically afford to pay in mortgage repayments.
Is now a good time to buy my first home?
Yes! The drop in demand from first-home buyers means that there is less competition in the markets and it is this competition which ultimately pushes property prices up.
Another benefit to buying property now, is that first home buyers will have more choice and a bit more time to make their decision with less pressure to jump into a deal.
You are able to secure a better deal in the current market, as sellers are becoming more realistic with their price expectations and more willing to negotiate on their sale price. A lower purchase price also means a lower deposit required which enables some buyers to now afford to purchase their first home.
Less homes are going to auction and this means you can negotiate to pay a price that you can afford rather than risk getting caught up in the hype of an auction campaign and paying too much for a property.
If you are looking at buying in one of Australia’s capital cities, you also may be in luck! There have been price decreases in a lot of the capital cities because many buyers are opting to live further away from home, or look to rural towns with more space to buy their first home. This is one of the benefits when businesses are allowing employees to work from home, there is no longer a need to live close to where you work.
If you are thinking of holding back and waiting to see what happens in the market, you might miss the boat as there is no guarantee that first home buyers will continue to hold off in 2023 so you should expect your competition amongst buyers is likely to rise again once we enter into the New Year. This is because we expect interest rates in 2023 to level out and begin to drop once inflation has kerbed. When competition in the buyer’s market increases, this will result in a higher entry level price for first home buyers and a larger deposit required to buy.
The best time for you to buy a property is when you can afford it. Keep in mind that property is a long-term investment even if you are buying a first home, you can reap the benefits of your asset over the long term!
Furthermore, there are many first home buyer’s incentives available, which are explained in detail below.
Are there any government incentives available for First Home Buyers?
First Home Buyer Guarantee.
From 1 July 2022 – 30 June 2023, 35,000 First Home Buyer Guarantee (FHBG) places are available to eligible first home buyers.
Under the FHBG, part of an eligible first home buyer’s home loan from a Participating Lender is guaranteed by the National Housing Finance and Investment Corporation (NHFIC) on behalf of the Australian Government.
This enables an eligible home buyer to purchase a home with as little as 5% deposit without paying Lenders Mortgage Insurance.
First Home Buyers Choice Initiative (NSW stamp duty).
First Home Buyer Choice initiative allows first-home buyers the choice of opting for an ongoing property tax instead of an upfront stamp duty charge from January 16, 2023.
This scheme applies to properties valued up to $1.5 million. For the purchase of vacant land for the construction of a new home, the price cap on the scheme is $800,000.
First Home Guarantee for single parents.
This is an initiative to help eligible single parents with dependants purchase a family home sooner.
Under the scheme, single parents can buy a home with just a 2% deposit without paying Lenders Mortgage Insurance.
The Family Home Guarantee is available through financial year 2025.
Regional First Home Buyer Support Scheme
The Regional First Home Buyer Support Scheme will potentially help 10,000 Australians a year who are living in regional areas buy their first home with at least a 5% deposit.
First-home buyers can buy a home with a deposit as low as 5% of the property value and the government will guarantee the other 15%, allowing borrowers to avoid paying LMI.
The scheme will start in January 2023.
What will happen to property in 2023?
No expert has a crystal ball and we will never be able to predict exactly how the property markets will perform in 2023. However, if we look at human behaviour and the economics behind the property markets we can identify the following trends:
- Risk adverse buyers will jump back into the property market in the new year. We will see more competition in the first home buyer’s markets once this happens, and this stronger demand only strengthens the property market and increases property prices.
- The rising interest rates and increased costs of living has forced some sellers to list their properties as they experience mortgage stress which has led to the current buyer’s market with the additional supply on the market. We would expect the interest rate hikes start to slow next year which is likely to enable sellers to be able to afford to hold onto their properties for longer which will restrict the market supply and strengthen the property market.
If you are looking for a buyer’s agent to assist you with purchasing a home or investment property in the Sydney, Brisbane and Newcastle regions, as well as SA, TAS, ACT, VIC, NSW & QLD please get in touch with Lloyd Edge and his team at Aus Property Professionals here or give us a call on 1800 146 837!
