High rents nudge FHB back into the market

First home buyers look to be making a comeback as the heady cost of rent push the scales in the favor of home ownership over leasing.

With the construction industry slowly clawing back the effects of supply chain and labour shortages, inflation on the retreat, and interest rates finally peaked for now, the future is starting to look a lot brighter for home ownership.

In recent data from the Australian Bureau of Statistics, the number of new loan commitments for owner-occupier first home buyers in December 2023 (seasonally adjusted) were 12.9 per cent higher compared to the year before.

This is seeing first home buyers staking their claim on property markets around the nation once more with activity increasing by about 13 per cent in the past year, according to the Real Estate Buyers Agents Association of Australia (REBAA).

REBAA president Melinda Jennison said the rapid rise in first home buyer activity during the tail-end of last year in particular could be attributed to the peak of the interest rate cycle having passed.

“Many first-time buyers were waiting in the wings for a clearer interest rate picture to emerge, which was the case at the end of last year.

“Indeed, it certainly looks like this year will be about interest rate reductions rather than rises, a positive scenario for all mortgage-holders.”

Ms Jennison said it appeared the rental crisis was motivating more and more people to become homeowners.

“Rising first home buyer activity is often the case when we experience periods of strong rental growth, with many tenants often running the numbers to discover that becoming a property owner makes more financial sense for them.”

Ms Jennison said while government schemes to help first-time buyers, such as Help to Buy, were attractive it was important that the future affects on your home ownership journey were understood beforehand.

Three first home buying tips:

• Buying strategy

Ms Jennison said it was vital prospective property owners recognised the importance of getting their first property purchase right.

“Your first property won’t be your last, but it is important that it is the best dwelling you can afford to purchase with the most upside potential.

“By purchasing strategically, first home buyers can fast-track their wealth-building journeys.”

She said it didn’t matter if first home buyers purchased strategically by undertaking plenty of research or working with professionals as long as the end result was the same.

• Be prepared to compromise

Ms Jennison said it was natural for your first property purchase to be an emotional experience, but it was important that first-timers did what was necessary to buy.

“Unfortunately, many prospective homeowners are not prepared to compromise on locations, or dwelling sizes, that they simply can’t afford and wind up doing nothing.

“Your first property is a stepping stone to your next one and probably won’t have all the bells and whistles that you currently desire.

“For example, my first property was in an outer-ring suburb of Brisbane.”

She said by refusing to compromise, many first home buyers ended up paying a high opportunity cost by stubbornly sticking to an unaffordable dream property.

• Be organised early

Ms Jennison said the most successful first-time buyers are the ones who get organised early, have completed the required due diligence, and gathered the necessary professionals together beforehand.

“Buying a property involves a legal contract that many first home buyers have probably never seen before.

“Having a conveyancer or solicitor to help guide you early on, as well as provide contract reviews, before submitting an offer is non-negotiable.”

She said understanding your budget was also a no-brainer for anyone looking to purchase their first property.

“But you need to get actual advice from a professional, like a mortgage broker, rather than completing a borrowing power calculator online, so that you are only looking at properties within your price range.”