5 Tips for first home buyers
The Upper North Shore property market is a competitive one right now.
But that isn’t deterring first home buyers from trying to get their first foot on the property ladder.
In fact, across NSW, first home buyer lending is at record high levels. Australian Bureau of Statistics data from May 2021 shows 32.7% of all new owner-occupier home loans went to first home buyers.
We’re seeing this phenomenon in our local market too. After a couple of years of low activity, first home buyers are back – spurred on by record low interest rates, ease of borrowing and genuine fear of missing out.
If you’rea first home buyer looking to secure your dream property on Sydney’s Upper North Shore, here are our five tips for getting ahead.
1. Be patient
First, don’t compare yourself to your parents. The world has changed a lot over the past 30 or 40 years. Property is more expensive and people tend to buy their first homes later - that’s a simple fact. Data released in late 2020 shows that the average age of Australian first home buyers is now 36. This is later than in countries such as Belgium, Iceland, Finland, China and India, but still earlier than Switzerland, Spain or Japan. This means first home buyers are no longer the same young couples or singles that they were in the past. They’re often young families with a kid (or even two or three) in tow. They’re also looking for a more diverse range of properties - ranging from small flats to family homes and knockdown rebuilds. If you’re looking to get onto the property ladder for the first time, our advice is to be patient and don’t beat yourself up too much if it takes a while to save a deposit. By being forced to wait a little longer than previous generations, you may end up having a bigger budget to spend.
2. Be prepared to accept help
Some commentators like to portray older Australians as profiting from the rise in property prices at the expense of their children. But the reality is that a lot of parents are using their wealth to help their children get onto the property ladder. Did you know that the “Bank of Mum and Dad” is currently Australia’s ninth-largest home loan lender? In May 2021, the AFR reported that 60% of first home buyers receive help from their parents to buy property, and the average contribution is $93,000. First home buyers receive other types of assistance too. Many move back in with mum and dad to help save on rent and outgoings so they accumulate a deposit faster. Others ask their parents to be guarantors on loans, even if no cash changes hands. If you go down this path, it’s important to document any assistance and make plans for a worst-case scenario, so relationships don’t suffer.
3. Do your homework
As we noted in our June 2021 Market Report, the property market is competitive right now and there are three key ways you can be first in line so that you stop missing out on properties that hit the market. First, connect with real estate agents and let them know what you’re looking for so they can tell you about any off-market opportunities before others get the chance to see them. Second, be prepared and ready to act when the right property comes along. This includes getting your finances in order, finding a good solicitor or conveyancer, and requesting the contract and strata report for any property you might be seriously interested in. Third, do your research on the current market and stay up to date with price rises so you can adjust your budget or search criteria accordingly. In a rising market comparable prices quickly become out of date and can change week-to-week. You have to be realistic about the fact that you may miss out on a few properties along the way. If you keep missing out, it can be worth investing in the services of a buyer’s agent.
4. Consider all your options and use different strategies
Sydney’s Upper North Shore is a blue-chip area and, if you’re a first home buyer, prices can sometimes feel out of reach. You can often get ahead by thinking outside the box and using a different approach. For instance, some first home buyers we’ve met have opted to buy off the plan, so they can put down a deposit now but then save as much as possible before settlement. Other first home buyers are using rentvesting, where they rent in the area they really want to live then buy in a more affordable area. That said, there still are some real gems for first-time buyers on the Upper North Shore. For example, late last year we sold this amazingly generous one-bedroom garden-style apartment at 1/1068 Pacific Highway for $490,000 in just 13 days. This shows just how fast you often have to move when the right property comes along.
5. Use the grants and schemes to your advantage
You probably know that first home buyers are eligible for some form of government assistance. But you may not know the extent of it… There are actually now four different State and Commonwealth government schemes, some of which provide generous support to many first home buyers. The two Commonwealth government schemes are: The First Home Super Saver Scheme The First Home Super Saver Scheme (FHSSS) is a Commonwealth Government scheme that gives first home buyers the chance to increase their savings by making extra super contributions they can later withdraw and use towards their first home. This means they’re effectively paying tax of 15% on any money they save, instead of paying their marginal rate. In the 2021 Budget, the Commonwealth government increased the withdrawal cap from $30,000 to $50,000 for the FHSSS. The First Home Loan Deposit Scheme Under the First Home Loan Deposit Scheme (FHLDS), the Commonwealth government guarantees up to 15% of a first home buyer’s home loan. This means you could possibly get onto the ladder with as little as five per cent of the purchase price without having to take out expensive lender’s mortgage insurance (LMI). In the 2021 Budget, the government announced that they were opening up another 10,000 places under the scheme. The NSW government also runs another two schemes: The First Home Buyer Assistance Scheme Stamp Duty is one of the largest upfront costs when buying property, and the NSW Government offers a helping hand through stamp duty concessions and exemptions for first home buyers. First home buyers don’t pay any stamp duty for brand new properties under $800,000. They then pay a concessional rate on new properties valued between $800,000 and $1 million. The scheme has also abolished stamp duty for first home buyers where a property is valued under $650,000. A concessional rate applies to properties valued between $650,000 to $800,000. The NSW First Home Owner Grant The NSW First Home Owner Grant is the longest-running and best-known scheme for First Home Buyers. It provides a one-off grant payment of $10,000 to buy a new property valued at less than $600,000. For new homes involving a house and land, that threshold rises to $750,000.
Summing up
The Sydney lockdown may still be in place but, if you’re a first home buyer, there are still properties coming to market that may suit your needs. In line with the current restrictions, we’re still offering one-on-one home inspections by appointment. So call us to ask any questions or if you’re interested in inspecting a home here on Sydney’s Upper North Shore - +61 2 9449 4444.
Other buying, selling and investing articles and resources
Guide to property investment success in NSW
Selling a house or apartment in NSW eBook
Buying a house or apartment in NSW eBook
