Guide to buying a house or an apartment in NSW
Homes are selling faster now than any other time in recent history. With strong buyer demand, combined with the lowest interest rates in history, we have seen prices surge right across Sydney and the regions. As a buyer, ensuring you understand the complete home buying process and what you can do to ensure you are prepared to move quickly when you find a property you love, is key to purchasing in this market.
Here is a deep dive into the buying process and what you can do to ensure you are prepared and ready to purchase.
Steps to research the real estate market
Immersing yourself in the local property market is a key first step when buying a property. The more information you have about the local and wider property market the more informed your purchase decision will be. But where do you start?
Understand the complete home buying process and what you can do to ensure you are prepared to move quickly when you find a property you love
1. Local market data
Getting a strong feel for the neighbourhood is another key step when doing your research.
- Talk to the local real estate agents and gather as much insight as you can into the market. What’s selling, for how much, how quickly and what’s coming on the market? They will know details around the local area and be able to build your knowledge while also notifying you when an off market and or suitable property becomes available.
- To find a local DiJones agent click here
- You have decided to make a sea or tree change because of changing priorities
- Walk or drive around the neighbourhood and talk to the locals. Find out what it’s really like to live there.
- Visit the local council website. Are there any planned developments or infrastructure projects that might impact properties in the area?
2. Market data information
There are a number of free online resources you can access to understand the following:
- Current property listings
- Median property prices
- Are prices increasing or decreasing in the suburb
- Buyer demand
- Are houses or units more common?
- What is the auction clearance rate like – is there hot demand for properties
- What is the average days on market
- What is the average per metre squared price for properties
- If you’re buying an investment, which property type is giving the best return on investment in your suburb?
Australia has six main property types on the market, so you have a range of options to choose from:
Stand-alone houses - these are highly sought after and are ideal for families. When you purchase a stand-alone house, you’re also buying the land it sits on. The location and value of this land can play a huge role in the price you’ll pay.
Semi-detached houses - are a single-family dwelling that share a common wall with one other property. They are often mirror images of each other and can include separate backyards. Semi-detached houses have two titles.
Duplex property - is a similar concept to a semi-detached house, though they are more modern. The major difference between the two is that a duplex can have a single title or two titles.
Australia has 6 main property types to choose from
Terrace houses - were introduced in the 1800s and range in height – from single storey to four storeys, with any number of bedrooms. There are original styles and modern, new terrace homes to choose from.
Townhouses - are two or three storey layouts, with several properties sharing walls. They generally have a small outdoor area allocated for each property, and they are usually sold under strata title.
Apartments or units - are part of a much larger building that can have up to hundreds of other residents all living next to each other. They can be one bedroom, or up to any number of bedrooms and range in price depending on location, level within the building, and facilities available.
The answer to this is simple. When you’re ready. There’s no specific time of year, no set age that you need to buy. Essentially, you want to buy when you have your finances organised, approval from the bank, and have found the ideal property to suit your individual, family and household requirements.
Once you have established these, you can look further into the market itself and get the timing right. Every city and every suburb moves through different property cycles at different times. When working out your timing, understanding these can be useful. Here are the four key property cycles you should be aware of when buying:
There is no right time to buy, it’s when you have your finances organised, approval from the bank, and have found the ideal property to suit your needs
The Boom - This is where real estate prices increase dramatically in a short period of time, usually 20% or more. It may last for a year, or a few, and you’ll see many new developments in this phase.
The Downturn - The Boom is usually followed by the downturn, which is where you’ll see prices drop as a result of over-supply from all those new developments. Values will generally become stagnant and could even drop by up to 10%. This phase can last a few years.
The Stabilisation - This is where the market remains stagnant – with no major increases or decreases. Again, this phase will generally last for a couple of years.
The Upturn - Vacancy rates start to fall, rents start to rise and property values also begin to see an increase again. Property is usually affordable, and this stage could last a few years.
How to create your buying a home wish list
Before you start house hunting, you want to make sure you have a full list of things you’re looking for in a home. A wish list will help you to determine if you want to inspect a home (it ticks all or many of the boxes) and from there, you can make a more informed decision about the purchase.
Your wish list could include the following:
- City, town or suburb you want to live in.
- Your price range.
- Property type (see above).
- Whether you want an older style home, or something modern
- Proximity to amenities, including schools, public transport, shops.
- Whether you need a backyard.
- Location, location, location - Close to the beach? Near parks? A quiet or bustling street?
- How big you want the building size to be.
- Whether you want a turnkey property, or are looking for one to renovate and improve.
- Any special inclusions inside (eg walk in wardrobes, ensuite, updated kitchen).
Why is location so critical when buying real estate?
Location is one of the more important qualities of a property. You can change the look and feel of a property, but you can’t change its location. It is for this reason that it impacts the property’s value both now and how much capital growth you could expect down the track. Where you decide to live is generally a personal choice – you might prefer a city central location that gives you easy access to work and public transport, or you might prefer the suburbs for a more family-oriented lifestyle.
Desirable living locations are generally more expensive when purchasing a property; however, this also means that if you do sell your property in the future, you’ll attract keen buyer interest which can help ensure you achieve a good sales result.
When buying a home, you may want to consider the following location features:
The neighbourhood itself, is it family friendly? Are there parks or other facilities nearby that you might utilise? Does it have a welcoming feel? Are the bars, restaurants or cafes nearby? It's a good idea to check the crime rate as well.
Schools are imperative if you have children, you want to make sure there is a good school within close proximity to the home. Pay attention to the catchment areas for public schools, or research private schools nearby and see their catchment terms.
Infrastructure can be an essential aspect when buying a home and you’ll want to consider access to roads, or rail and bus networks. Water supply and internet connectivity are also crucial considerations.
Location is one of the more important qualities of a property. You can change the look and feel of a property, but you can’t change its location
Proximity to amenities, such as shopping centres, restaurants, entertainment facilities. Buyers generally want to be within 5-10 minutes’ drive from a supermarket, at the very least.
Development that is either occurring or up-and-coming is another crucial aspect when choosing a location. Not only could construction works help you to get a better deal on a property, but future projects could enhance the value of that property in coming years.
Historic charm and streetscapes as you can just recreate this. The character of a neighbourhood takes years to build and tends to help resale value as it is hard to replicate.
Questions to ask an agent
Gathering as much information about a property as possible is important and the real estate agent selling the property is a valuable source of information.
Sometimes it’s hard to know what to ask, so here are some key questions to help get you started:
- Can you share with me why they are selling?
- Can I get a recent property sales report for the area?
- When did the property last sell and for how much?
- How old is the property?
- How long has the property been on the market?
- Are there any issues with the property, the land or the neighbour’s properties?
- Have the owners done any renovations to the home? Have they been certified?
- Has the owner completed a pest and building inspection and can I get a copy?
- How much are they expecting to sell the property for?
- If it is selling via auction are they open to pre-auction offers?
- Can I get a copy of the sales contract?
- What’s included in the sale price?
- Is the price negotiable?
- What’s the suburb like and has it seen much change in the past decade?
How to do your due diligence when buying a property
While personal inspections are critical it is also important that you have professional inspections carried out on the property, so you know exactly what you are buying. Professional inspections include:
Professional building inspection - the inspector will look at the property’s condition, including any building defects or problems, such as mould or damp. It also covers cracks in the walls, safety hazards and roofing faults, among other things.
Pest inspection - detects if there is any sign of vermin, termites or other pests. The pest inspector will look for any existing damage and, at the same time see if there is potential for future damage. Both the interior and exterior of the home will be inspected.
Final inspection / pre-settlement inspection - this is carried out in the final steps of the settlement process to ensure any contractual obligations from the seller have been met and that the property is in the same condition it was in when it was purchased.
Gathering as much information about a property as possible is important for you to be able to make informed decisions
How to review your contract of sale when buying a property
Buying a property is a legal process so ensuring you have a conveyancer or solicitor to help you manage the purchase is critical.
Your legal team will assist with the following:
Contract Review - reviewing and providing advice regarding the terms and conditions of your Contract of Sale, including analysis of planning restrictions.
Contract Negotiation - discussing any problems with the seller’s legal team to ensure both parties are happy with contract terms.
Finalising Contract - assisting you to finalise settlement with your lender, ensuring the lender receives all necessary title details and helping to prepare mortgage documents.
Preparation - preparing transfer documents to ensure the property is legally transferred according to NSW laws.
Settlement - assisting with property settlement by helping to arrange a time and date for settlement, contacting the lender to transfer funds, and coordinating key handover with the seller’s agent.
What are the costs of buying a house or an apartment?
When buying a house or an apartment, ensuring you are aware of the costs over and above the purchase price is very important when setting your budget. You don’t want to be hit with surprises you hadn’t planned for.
Here is a look at some of the average costs you should take into consideration:
- Conveyancing and legal fees $1,800
- Stamp duty. To see how much you would need to pay click here.
- Building and pest inspection $500-600
- Mortgage registration fee, approx. $180
- Property valuation fee, approx. $500-600
- Loan application fee, approx. $500-600
- Lenders Mortgage insurance if you borrow more than 80% of purchase price, $8,000
- Council and utility rates, varies depending on location, minimum $500 per quarter
- Ongoing mortgage administration fees, $5-15 per month
What is stamp duty when buying a home?
Stamp duty is one of the largest fees associated with home ownership. To put it simply, it is a levy on the purchase of a home, a state-imposed tax that you must pay in addition to the mortgage, deposit, and other costs associated with purchasing a home. The amount you’ll need to pay is dependent on a number of things, including whether you are:
- A first home buyer
- Purchasing an existing home, a new home, or vacant land
- A foreign buyer
- Purchasing a personal residence or an investment property
The actual amount is determined by the state or territory where you live and the purchase price of the property, and whether you are eligible for any exemptions. Stamp duty for first-time buyers is significantly lower than for other buyers.
How much deposit do I need to buy a house or an apartment and why?
The amount you’ll need for your home loan depends on two things – the lender and your own personal circumstances. You generally have three minimum deposit amounts: 5%, 10% or 20% of the property value.
The larger the deposit you have, the more benefits you have, including:
- It shows the lender that you can reliably save money
- Regular savings, combined with rental payments gives the lender an idea of what you can afford to pay each month
- The larger deposit you have, the smaller your loan will be which can save you considerable money over the lifetime of a loan
- Higher deposit can lead to your loan having lower interest rates
- Less interest means paying off the loan faster
- The higher the deposit the less chance you will have to pay Lenders Mortgage Insurance
Essentially, you want to save as much as possible before you apply for a home loan. The more funds you have, the more likely you are to be approved for the loan. Remember you also need to account for other fees outside your deposit, including conveyancing and legal fees, title searches and registration fees, building and pest inspections, Stamp Duty and any other Government fees.
First home buyer benefits. If you’re a first home buyer, you should be able to use the First Home Owner Grant towards your deposit. To find out more click here.
What are the different types of home loans?
The following home loans are the most common in Australia:
Owner-Occupier - for borrowers who intend to live in the property they are buying. Typically offer lower interest rates than other types.
Refinance - linked to a normal home loan, these allow you to refinance your home loan to a new loan, with a lower interest rate or extra features.
Investment - designed for people who wish to purchase a property for investment purposes, These typically have higher interest rates and are harder to obtain than owner-occupier loans.
You generally have three minimum deposit amounts: 5%, 10% or 20% of the property value
Low doc - is an option for people who may not have the necessary income documents. Lenders view it as a higher risk because the borrower's income cannot be verified and as such, these loans will typically have a higher interest rate, as well as additional restrictions on the maximum Loan to Value Ratio.
Reserve mortgage - allows homeowners who are asset-rich but cash-strapped (who are often over the age of 60) to tap into the equity in their property. They are normally not required to make payments while living at the property, but must pay in full on selling or if they pass away.
Construction - obtained when building a new home or renovating an existing one. Construction loans pay for expenses as they accrue during the construction phase and are generally delivered in six stages, from deposit to completion.
What type of information do I need to apply for a home loan?
To apply for a home loan, while every lender is different you generally need to provide them with the following documentation:
- ID – a primary photographic ID (passport or driver’s licence) and one non-photographic form (birth certificate); as well as a secondary document (Medicare card or utility bill).
- Earnings – a copy of your bank statement with your last two salary payments, or recent payslips, or a letter from your employer. If you’re self-employed you need to provide financial statements, tax return and ATO Notice of Assessment and your accountants’ details. Other details: superannuation, Centrelink statements, rental property income statements, investment income shareholding certificates or dividend statement notice.
- Assets – details of any shares, property, vehicles, or significant assets and supporting documentation.
- Debt details – including personal loans, credit cards, store cards, leases and so on.
- Living expenses should be listed, including petrol and car maintenance, groceries, gas and water bills, entertainment, insurance, clothing, childcare, internet, etc.
- Rental details for the property you are currently living in if you don’t own it yourself.
Of course, different lenders have different requirements so this list may vary. Talk to your lender about what they require so you can get your paperwork in order as this can help fast track a loan application.
Using super to buy a house or an apartment - is it possible?
Yes, you can use your superannuation, but you need to be within one of three groups - first home buyers, property investors, and over-65’s / retirees.
First home buyers can access their super under the Federal Government's First Home Super Saver Scheme. This allows buyers to access up to $30,000 ($60,000 per couple) from previous voluntary contributions (not employer’s contributions). From July 1, 2022, this will be $50,000 per person ($100,000 per couple).
Investors who are members of a Self-Managed Super Fund (SMSF) can utilise funds to purchase an investment property. However, you are not permitted to live in the property.
Seniors above 65 years, or retirees who have reached the “preservation age” can use super to purchase a home if you have complete access to your superannuation. If you were born before July 1, 1960, the minimum preservation age is 55. Increasing to 60 years if you were born after July 1, 1964.
Importantly talk to your accountant or financial advisor if you are considering buying a property with your superannuation.
You can use your superannuation to buy a property, but it must be an investment and it comes with very strict regulations
Can I buy a house with no deposit?
No deposit loans are generally not offered by lenders anymore. However, there are some ways you may be able to come up with a house deposit including the following:
- First Home Owner Grant can form your deposit, but you need to allow for legal fees and other expenses. To find out more click here.
- The First Home Super Saver scheme allows you to access your superannuation to pay your deposit, with strict conditions. You can also use your super if you are retired or an investor with a self-managed super fund. Find out more click here.
- Consider a guarantor – a family member or friend who can offer their own property as a security for your loan, allowing you to borrow 100%-120% of the purchase price.
- A financial gift can be given to you from your parents or other close contacts that will cover your deposit cost.
How to buy a house or an apartment - the different methods explained
Up until recently there were three keyways to buy a property in NSW; auction, private treaty, tender / expression of interest. However due to the recent pandemic, we have seen ‘off-market’ sales increasing in popularity. Partly due to restrictions on open for inspections and partly due to the high demand from buyers across much of NSW. These buyers have been super keen to purchase a property and are willing to pay more in many cases if they can buy it before it goes on the market.
Here is a look at the different ways you can buy a house or apartment in NSW.
An auction is a public sale of a property and is governed by strict regulations. Following normally a 4-week marketing campaign, prospective buyers are invited to gather at a particular date, time and place and bid on the property.
Due to the nature of the auction campaign, they generally attract a number of bidders competing for the property. These people often have a set budget in mind and are prepared to outbid each other to achieve the purchase. Sellers will set a reserve price – which is the lowest price they will accept and once the bidding reaches that reserve price, the property will sell to the highest bidder. If the property doesn’t reach the reserve price, the highest bidder can then negotiate with the real estate agent and property owner in an attempt to find a price both parties are happy with.
Due to the recent pandemic, we have seen ‘off-market’ sales increasing in popularity
Due to lockdowns and crowd restrictions over the last 18 months, we have seen the rise of on-line auctions, and this is a trend we see continuing. We have found many buyers have preferred this method as it is often less stressful but produces the same result. We expect most auction campaigns once COVID-19 has gone will be promoted as both face to face and online.
How to make a pre-auction offer when buying a home
If you want to get in early and avoid the stress of an auction, you may consider making a pre-auction offer. To do so, you will need to send a formal offer in writing to the real estate agent before the auction date (generally 1-2 weeks before auction day).
To increase your chances of success, do your research on the local market and other similar sales before putting in your offer. Also, talk to the real estate agent and discuss your intention to get an indication of what to offer and how you might improve your chances of buying the property before auction.
How to bid at a property auction
When you register to be part of the auction on the day, you’ll be handed a paddle with a unique bidder number. You will need this paddle in order to bid.
Auctions can be stressful so watch your competition to see what they are doing – if you notice they have stopped paying attention, the bidding has probably gone over their budget and bidding could be yours. Importantly don’t get caught up in the emotions and excitement and over-bid. Stick to your budget and don’t be afraid to mix things up – for example you might bid in smaller or larger increments. Be confident, particularly towards the end of the auction.
It’s a good idea to attend a few auctions before you bid at a property you are interested in as it can show you the different ways people bid and can help you formulate your own auction strategy.
Most importantly don’t get carried away and go over your budget. There will always be another property.
A private treaty sale is when the seller lists the property for sale at a particular price. This sale price will be determined after considerable research into the local market and discussion with the real estate agent. The property will be advertised, and prospective buyers are invited to make formal offers in writing to the agent.
Unlike buying a home at an auction, purchasing through private treaty means you can negotiate a sale price and sales terms with the seller or real estate agent.
If your offer is accepted the next step is to sign and exchange the Contract of Sale. Keep in mind the sale is not finalised until contracts are exchanged. This means the buyer or seller can pull out of the sale, or the seller can negotiate with other buyers for a higher price.
Private treaty sales in NSW also come with a 5-day cooling off period which starts as soon as you exchange contracts and ends at 5pm on the 5th business day after signing. You can waive the cooling off period by giving the vendor a ‘66W Certificate’ or reduce the period by written agreement with the vendor.
How to negotiate a private treaty sale
With a private treaty sale, the owner of the property has set a price they would like to sell their property for. But that doesn’t mean it isn’t open to negotiation. Whether you negotiate yourself or ask a buyer’s agent to do it for you, you need to do the following:
- Ensure you get a copy of the Contract of Sale as soon as possible and have it reviewed by a licenced conveyancer or solicitor.
- Ensure you have completed all pest and building inspections so you know what you are buying.
- Have pre-approval from your lender in writing to show you have the financial backing for the negotiated price.
- Have your finances already approved as this will give you a competitive advantage.
- Set a budget and don’t offer more than you can afford.
- Start below your walk away price and increase your offers where necessary.
- Don’t wait. Particularly when the property market is booming. Putting in an offer on your ideal property early may mean you secure the property of your dreams.
- If you want to take it a step further, after your conveyancer or lawyer has carefully reviewed the contract and you are aware of what is included and your expectations, you may consider signing the contract and attaching the deposit cheque. This will show you’re serious about your offer.
In real estate, Expressions of Interest or tender campaigns are used to get offers on properties without disclosing a sales price. These campaigns generally have a deadline for the property owner to sell, usually between four and six weeks. The property is marketed in various forms, including online advertising, newspapers, signage, and more. In that time, potential buyers can arrange to view the property by appointment or during a house inspection.
If you wish to purchase the property, you can submit a single offer (first and best) prior to the deadline. This offer is submitted in writing and will usually include terms such as a preferred settlement date or any inclusions. As the final sales date approaches, the real estate agent and the seller will go through all the expressions of interest to determine which buyer the property will be sold to.
If you are buying a property this way, it is important to put your best offer forward first as you don’t have the opportunity to see what other buyers are offering. Making a strong offer up front can give you the advantage over other buyers.
What does buying a property off market mean?
As a result of the recent lockdowns and restrictions around COVID-19, this method is rising in popularity. What it means is you are purchasing a property that has not been widely publicly advertised. It may only be listed on the agency’s website as an ‘off-market’ listing.
These properties are generally not advertised on real estate portals, nor are there signs out the front of the property. They are normally promoted directly from the real estate agent to specific buyers on their database or via buyers’ agents.
As a buyer, ensuring you connect with your local real estate agents so they know what you are looking for, and contact relevant buyers’ agents, can help you stay across what properties are for sale off market.
How to buy an apartment or house off market
As this is a slightly different way of buying a property than you are potentially used to, we recommend the following steps to buying off market:
- Understand the market value of the property. Ensure you have done your own research and have a good understanding how much the property would be worth if it went to a public auction or was sold via private treaty.
- Consider engaging a buyer’s agent who knows the area well and can guide you on price expectation and through the negotiation.
- Ensure you have completed all your due diligence including building and pest inspections and your legal team have thoroughly reviewed the contract.
- Put all official offers in writing and be prepared to negotiate and be flexible on the terms and conditions.
- Have your finances already approved as this will show you a serious buyer.
- Set a budget and don’t offer more than you can afford.
Many home buyers are nervous about buying before selling and vice versa. They worry about carrying the burden of bridging finance, not being able to sell their property once they have bought, or not having a place to move to if they sell first. What if you could find a team of real estate agents who could help you buy and sell at the same time and take this stress away.
At DiJones, the way we are set up is unique. We have a centralised network wide database which enables our team of real estate agents to promote properties directly to our high intent buyers, plus we are able to connect buyers to homeowners who we know would be prepared to sell their property if the price was right.
Bundling your buying and selling with DiJones is easy given the way our data is shared and how our teams right across NSW collaborate to achieve the best result for our clients.
Buying and selling at the same time is easier if you bundle them and our team can help
A final word on the process of buying a house or an apartment
There are a number of steps to consider when buying a home and we hope that you found this guide a useful resource.
If we can be of any help with finding your new home or notifying you when a suitable property comes on the market, please connect with your local DiJones real estate agent here.
Good luck and happy searching.