For at least a decade, many first-home buyers felt pretty pessimistic about getting onto the property ladder, but recent data shows the mood has lifted. Even low and middle income earners and buyers as young as 20 are now purchasing their first homes.
Thanks to record low interest rates, stamp duty exemptions in some states and territories and now the First Home Loan Deposit Scheme, which kicked in on January 1, first timers have finally caught a break.
According to the ABS, first home buyers have bounced back into the housing market in a big way – at the fastest rate in 10 years.
In just one year, to the end of January, the value of new home loans granted to first-home buyers jumped by 46.2 per cent to $4.19 billion. And in January alone, almost 10,000 first-time buyers took out home loans, a rise of 25.5 per cent in 12 months.
Such a spike in first home buyer activity has been brought on by the Federal government’s FHLDS, but with only 10,000 spots up for grabs some buyers are experiencing FOMO. By the end of February around 7300 first home buyers had already signed up to the scheme.
“Prospective property owners were aware they needed to move quickly if they were going to have any chance of securing one of the deposit scheme’s limited allocations from the start of the year,” said Zippy Financial Director and Principal Broker Louisa Sanghera.
“The number of first home buyers has been growing for the past year, but the past month saw enquiries to our office strengthen considerably,” Ms Sanghera said.
Although the initial round of the FHLDS may be about to reach its limit, another 10,000 spots are promised in the new financial year on July 1.
Stay calm and brace for some bumps
Instead of panicking to get a spot straightaway, first home buyers should get ready to secure a loan, and then their place on the scheme’s list.
Ms Sanghera said would-be property buyers should be prepared for their loan applications to take a few weeks, or longer, as brokers and lenders work through the necessary checks and balances.
“The most important thing is to stay calm and be prepared for some bumps in the road,” she said.
“Long before they decide to buy property, first-time buyers should seek expert advice and instigate a number of budgeting and saving strategies to improve their borrowing capacity.”
She said there are a few first-time buyer finance strategies that can help people get into homeownership sooner.
• Create and stick to a budget before (and after) becoming a homeowner, which will help you manage mortgage repayments.
• Buy a house first and a car second. Large car loans can significantly impact borrowing power.
• Reduce discretionary spending including Uber Eats and Afterpay purchases.
• Cut up credit cards or reduce limits.
• Research areas you can afford and then consider applying for a loan pre-approval before starting your property search.
• Apply for a loan pre-approval at your likely maximum purchase price. You can always reduce the amount of loan required, but it can be difficult to increase the loan once approved.
• Understand the timeframes and steps involved in securing a FHLDS spot.
• Speak with a broker to understand your borrowing capacity and their requirements.
Never too young to become a homeowner
Taylah Richardson and Reece Hedger are only 20 and 21 years old, but have just become homeowners in the Hunter Valley town of Cessnock, 50kms west of Newcastle.
The couple, who have been saving for a home deposit for four years, said they wouldn’t be getting the keys to their own home this month if it wasn’t for the FHLDS and a dedicated savings plan.
“We were going to get lender’s mortgage insurance and that would have meant paying about $10,000 but then the FHLDS scheme came out. Now, with paying the deposit and the legal fees we needed roughly $21,000 and we saved that up ourselves,” Ms Richardson said.
They recently bought a three-bedroom house for $320,000.
“Without the scheme it would have set us back a lot of money and it probably would have taken another year, 18 months or even two years to buy,” she added.
But the childhood sweethearts didn’t want to wait that long after finding out their first baby is due in August.
“We wanted some stability and a place to bring our baby home to. I want my family to live in a home, not just a house. It’s now ours for a long time, we didn’t want to have to move on every couple of years when the lease runs out,” she said.
Ms Richardson, a nurse and Mr Hedger, a mining storeman, have been saving $50 a week since they were 16 and gave up on little luxuries that many of their peers wouldn’t imagine forgoing.
“We stopped spending on things we didn’t need, stopped going to the movies and made sacrifices. It’s about not having take away during the week, it’s about being on a budget and having a shopping list when you go to the supermarket so you don’t get things you don’t need.
In the last few months we saved like crazy, living off two-minute noodles to buy our house,” explained Ms Richardson who is also a full time uni student.
But they didn’t sacrifice everything. The pair’s beloved dog needed a $6000 operation, which took an enormous bite out of their savings.
“It’s about prioritising what’s important to you, you might see a shirt you like, but put it back because that money could go to the house and every cent really does count.”