The post-pandemic recovery of the Australian real estate market has been phenomenal, to put it mildly. CoreLogic revealed in October that the total value of residential real estate in Australia reached a record high of $9.1 trillion in September 2021 after clocking $8 million just five months back. This is about 28.2% higher than the estimated values.
While sellers rejoice at the growth, this has put even more pressure on first home buyers in terms of affordability. And especially when house prices have increased at the fastest rate in 17 years. With a significant negative impact on consumer sentiment in the sector, is there any respite for first home buyers?
With the right approach, a few tips can help first home buyers get their foot in the door. Let's take a look:
Get Laser-Focused On Your Target
To put up the deposit is likely to be a huge task in this property market. Churning the numbers and pinpointing how much you require to seal the deal would set a clear and concise target. This will help you save up for the deposit and give you a better idea of what type of property would suit your budget. You can then finalise a timeline for your purchase.
When judgement day beckons, you will find many different possible paths. For example, you may take advantage of first homebuyer concessions or put a family guarantee to use. Thus, a clear target will help you make such decisions without getting swayed.
Get Your Priorities Right
You would have to keep in mind many things while finalising your first property. It would be nothing like picking up an investment property where you are primarily interested in the bottom line. Instead, you will have to consider your lifestyle and future plans while keeping an open mind toward making necessary compromises.
For instance, if you are looking for a property in the heart of the city to be close to your workplace, you will have to pay a premium for the location. Such priorities would directly impact your budget and the type of property you would be able to afford. Therefore, getting your priorities right from the start will save you a lot of time and effort while house hunting. It will also help you make smarter decisions with your lifestyle to ensure the best utilisation of your budget.
Try To Buy The Property With No Cash Deposit
It might take you an average of 17 years to save a 20% deposit for a house in Sydney. Thus, it makes sense to leverage any opportunity that can help you buy a property with no (or very little) cash deposit.
As a first home buyer, you can buy the property without putting down a single dollar as a deposit. With something called Family Guarantee (or 'Family Pledge' or 'Equity Guarantee'), you can name another property owner as a guarantor for your borrowing. To do this, you need a family member with an existing property that can be used as a guarantee. This is made possible with a loan from the bank against the family member's property value. Also known as Guarantor Loans, these have risen by 71% over the last 6 years.
Although the benefits are many, ensure that you and your family members understand the risks of this type of investment.
Create A Savings Plan For Your Deposit
Not using the option of Family Guarantee can also have its fair share of benefits, such as lower monthly mortgage payments. So if you are going down this route, you need to have a solid savings plan for your deposit.
One of the best ways to go about this is by utilising a high-interest savings account. This will help you earn higher interest on your deposits and reach your target much faster. For example, if you are looking to buy a house in Sydney that costs $850,000, you would need to save $170,000 for a 20% deposit. Assuming you can earn an interest of 7% per annum on your savings of $2000 per month, it would take you about 6 years to reach your target.
There is no one-size-fits-all solution for saving up for a deposit. However, setting up a budget and utilising high-interest savings accounts are two best ways to reach your target much faster.
Reduce Your Interest Rate With Joust
Buying your first house is a huge milestone. It's a time when you're finally ready to start building equity and establishing roots. But with prices on the rise, it can be hard to know where to start.
This is where Joust comes in. As a tech-enabled platform for home buyers, it helps you navigate through the various options in the market and get the best home loan deal for your specific need. You can uncover all available home loan products and get the lowest interest rates, saving thousands of dollars. This is made possible with a live marketplace where multiple vendors compete for your loan with competitive interest rates! And the Instant Match feature picks the top 3 home loans by processing thousands of different products against your needs within seconds!
Purchasing a home can be a daunting task as it can be hard to know where to start. But there are some excellent options out there that can help ease the process and make your search easier. With Joust - you can find the best loan deals with competitive interest rates by accessing up to 80% of home loan lenders in Australia!
