Prospective first home buyers (FHB) are constantly reminded of the difficulties of getting into the Australian property market. It seems that every day a new article or commentator is listing the difficulties Aussie FHB face in securing their first property. The reality is that there are challenges for FHB, but they’re not insurmountable.
In fact NAB’s Quarterly Australian Residential Property Survey shows that FHB have increased their presence in new property markets in the first quarter of 2016, making up one in three of all sales of new property for the March quarter.
So the good news is that FHB can get into the market, as long as they do their due diligence, seek out help when they need it and keep the following in mind.
FHB or any type of buyer, need to know as much as possible about the property they’re planning to buy; what condition it’s in, what the street is like, what the suburb is like and the proximity to amenities are just a few examples.
FHB also need to get as deep an understanding of the market as possible. Understanding market trends, what is motivating other buyers, and what suburbs and areas are attracting the most attention will help immensely in selecting the right property.
Speak to an expert
This links very closely with research. Seeking expert advice is crucial for FHB. They should look at engaging professional guidance not only for selecting a property and negotiating its purchase, but also engaging a mortgage broker (which is a free service to the buyer) to find the best loan. Knowledge is power and buyers should work with many experts to build their knowledge pool.
Be prepared to compromise and keep an open mind
Most first home buyers will have to compromise on at least one of the three Ps – price, property and position. A buyer might find a great property in the great position for them, but it may be beyond their budget. Or a great property for a great price, but not in an ideal position. Buyers should keep an open mind about what they can secure that still suits as many of their requirements as possible, and be prepared to look in areas outside their preferred suburbs.
Even experienced buyers have to compromise on some things. National Property Buyers advocate, Rob Di Vita, spent two years looking for his current property. Despite working in the property industry for years and having owned other property previously, Rob still compromised partly on the position. Rob originally wanted to buy in the inner city suburb of Prahran, but then shifted focus to outer suburbs. After extensive searching he found a property in Kew. However, the property was on a main road but Rob was happy to compromise on that aspect.
Play the long game
Compromising on the first property purchase isn’t necessarily a bad thing. The first purchase can be used a stepping stone to secure something more in line with the buyer’s long term aspirations. Buyers can grow equity in their first purchase over a few years, which they can then leverage to purchase a second property. The first property can be sold, or leased out with a tenant covering the mortgage repayments.
For example, a two-bedroom villa unit or townhouse can be good purchases for FHB. They require less maintenance than a house, offer more space than an apartment, and provide a land component, usually a courtyard. Something like this offers scope for buyers to live in for a few years and update (depending on its condition), accumulate in value, and then serve as a good investment property which can be leveraged against to buy a second property.
Other things to remember:
- Get pre-approval before searching- This may sound obvious, but many buyers begin searching, and sometimes put down offers, before they have secured financial pre-approval. Getting pre-approved beforehand helps you gain a clearer understanding of your borrowing capacity and what you can afford in terms of mortgage repayments.
- Be prepared to sacrifice, but not too much- Purchasing and paying off a mortgage does require sacrifices; everyone knows that. But buyers shouldn’t over extend themselves so much that they are sacrificing everything they enjoy doing by putting themselves under mortgage stress. Working to only pay off a mortgage and not enjoying life isn’t the way to buy a property; owning property should be a good experience, not a negative one.
- Go to auctions and make offers- Observing auctions will help prepare buyers for the real thing. It’s always a good idea to acclimatise to the auction atmosphere so buyers aren’t overwhelmed when it comes time to bid for themselves. Buyers shouldn’t shy away from making a pre-auction offer to secure the property if they believe they stand a strong chance of taking it off the market. Property professionals will serve best in this process.
Buying property is a big undertaking, often regarded as one of the most stressful events in life. FHB shouldn’t get disheartened if they have trouble securing a property; it can be a long process but the reward will come with time and perseverance. Don’t give up!