More first-home buyers are set to enter the property market as the Reserve Bank of Australia’s (RBA) recent interest rate cuts and expanded government schemes put more homes within reach. Experts say buyers are “no longer waiting on the sidelines”, with many finding new ways to enter the market.
Bethany Townsend is hoping to buy her first property early next year using the government’s 5 per cent Home Guarantee Scheme. The psychologist, in her 30s, told Yahoo Finance she had moved back home with her parents on the Gold Coast to help save up a deposit.
“If you’re lucky enough to have that chance, it’s always really beneficial,” Townsend said.
“I moved back in July last year.”
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Townsend said she was lucky to be living back at home rent-free, while covering the cost of her own groceries.
She was previously spending $500 a week on rent and shared she was now able to save this amount, plus more, by living at home.
She plans to relocate to Melbourne in November, where she was based previously. She’s working towards a $400,000 budget for an apartment in Melbourne’s south-east.
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New research from Resolve Finance found first-home buyer demand was rebounding, despite soaring rents and increasing property prices.
Its survey of more than 1,000 renters found 57 per cent were planning to buy their first home or investment property in the next two years, up from 42 per cent last year.
Resolve Finance managing director Don Crellin said we were seeing a first-home buyer “comeback”.
“Many Australians, particularly younger buyers, are no longer waiting on the sidelines,” he said.
“Instead, they are finding new ways to enter the market, from purchasing with family or buying an investment property first, to using government assistance.”
Savings were the most common way to fund a deposit (82 per cent), followed by government grants and schemes (36 per cent) and family support (15 per cent).
While cash gifts are a common form of family support, living at home rent-free, loans and going guarantor are also popular options.
A recent PropTrack CommBank First-Home Buyer Report found that despite challenging market conditions, there were more first-home buyers in the past year than was typical during the 2010s.
REA Group senior economist Angus Moore said saving for a deposit was the “key hurdle” for first-home buyers, along with record-low housing affordability and tough mortgage serviceability.
The average-income household would need to save for 5.9 years to save a 20 per cent deposit for a median-priced home.
“Despite these conditions, first-home buyers are finding ways to enter the market. Recent government policies, low deposit loans and Lenders Mortgage Insurance are key enablers helping first-home buyers purchase,” Moore said.
“Many also seek homes in more affordable areas or purchase semi-detached homes or units to overcome affordability challenges.”
The increase in first-home buyers planning to enter the market comes as the federal government expands the Home Guarantee Scheme.
The changes, which have been brought forward to October 1, will remove income and place limits, and boost property price thresholds for first-home buyers with a 5 per cent deposit.
In Melbourne, for instance, the property price cap will increase from $800,000 to $950,000, while in Sydney it will go from $900,000 to $1.5 million.
Cotality found just over half of house markets (51.6 per cent) will fall under the new price caps, while 93.7 per cent of unit markets will qualify.
Townsend said she was conscious the upcoming expansion of the Home Guarantee Scheme would likely create more competition, but she’s remaining positive.
“I’m conscious that it will likely create a little bit more competition from those that are earning above the original cap that they had … they could now potentially outbid me on property,” Townsend said.
“But it is what it is, right? There’s always going to be some changes and people react to that, but I’ll just stay in my lane and keep working towards the goal.”
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