27 September 2020
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The best time for first home buyers

John McGrath
27 August 2019

It’s been such a long time since market conditions directly favoured young buyers, particularly in Sydney and Melbourne, and now the stars have aligned for them in every way.

History shows that first home ownership has provided a crucial foundation for long term financial security for millions of Australians. This Spring presents an immense opportunity for young people who have felt left behind by runaway markets to take that big first step onto the property ladder.

Here’s what first home buyers have going for them…

  • The lowest home loan interest rates since the 1950s, with talk of one or two more official cash rate cuts over the next year
  • An APRA-led loosening in lending criteria, which is now in effect across all lenders and enables more borrowing power
  • Improved or steady affordability in both capital cities and regional areas
    • Values down -13.5% since the peak of the boom in Sydney. Melbourne down -8.2%, Brisbane down -2.4% and Canberra stable with only 1.1% growth over the past 12 months, according to latest CoreLogic data
    • Values down -4.6% in Regional NSW over the past year; -1.7% in Regional Queensland; and -0.9% in Regional Victoria
  • Less competition from Australian investors, with investor activity falling 40-50% on 2016/2017 peaks in NSW, Victoria, Queensland and ACT, according to ABS data  
  • Less competition from foreign investors, with hefty application fees and state taxes putting off overseas buyers, particularly in the sub-$1 million new apartment category
  • Stamp duty concessions, with no duty payable on new or established properties up to $650,000 in NSW (concessions up to $800,000); $600,000 in Victoria (concessions up to $750,000); and $550,000 in Queensland (for properties above $550,000, eligible buyers can claim a concession on the first $350,000 of the purchase price). In the ACT, no buyer (not just first buyers) pays stamp duty if they meet certain income, family and prior ownership criteria
  • First home owner grants, which are as follows:
    • NSW: $10,000 if you buy land to build your first home worth up to $750,000; or buy a new house or off-the-plan apartment worth up to $600,000
    • Victoria: $10,000 if you build or buy a new property in Melbourne worth up to $750,000; $20,000 if you build or buy in Regional VIC by June 30, 2020 
    • Queensland: $15,000 if you build or buy a new property worth up to $750,000
    • ACT: FHOG replaced by stamp duty savings from July 1, 2019 through the Home Buyer Concession Scheme
  • Help with saving via the Federal Government’s First Home Super Saver Scheme, which provides a tax break for people saving for their first home. You can make voluntary contributions of up to $15,000 per year ($30,000 total), which will be taxed at the superannuation rate of just 15%. These funds, along with earnings, can then be withdrawn for a first home purchase
  • Help with the deposit via the Federal Government’s new First Home Loan Deposit Scheme, which will allow 10,000 young buyers per year to purchase with a 5% deposit and a government guarantee on the rest. There will be purchase price limits per region and income thresholds. Available from January 1, 2020
  • The HomesVic co-equity scheme, whereby eligible first home buyers in Victoria can co-purchase a new or existing property with the Victorian State Government with just a 5% deposit

With such positive market conditions and so much assistance available, now is the time for young people to consider making their first purchase.

I’ve got two pieces of advice to help you this Spring.

Firstly, don’t make assumptions as to whether you’re eligible for assistance. The rules are slightly different in every state. For example, in some states you are still eligible for a FHOG even if you’ve owned an investment property before. Also, some substantially renovated properties are considered new enough for you to be eligible for the grant. Go online and check.

Secondly, don’t overextend yourself. You always want to buy a high quality property in a great location but don’t push yourself too hard. Keep things financially comfortable with buffers in place.

I’d rather you buy a high quality one-bedroom apartment in a brilliant location than overextend and buy a two bedder that will be unaffordable as soon as interest rates go up.

Sure, rate rises might be years away, but remember the life of a loan is usually 25-30 years and in that time, they will surely go up.

Think smart, buy smart.

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