John McGrath – Advice for first home buyers this Spring
With the traditionally busy Spring selling season commencing this week, my key piece of advice for all buyers, particularly young first home buyers, is to take advantage of today’s changing market.
Don’t delay your purchase because you think the market has further to fall. We won’t know we’re past the bottom until we are, and then you’ll be competing with a surge of returning buyers.
In the case of Sydney and Melbourne, I think we’re already more than halfway through this market correction. The peak was last October, so the market has been cooling for almost a year now. If you buy this Spring, you can be confident of getting a 5%-10% discount on last year’s prices.
During Spring, we typically see more properties come onto the market, so you’ll have more choice. Plus, softer prices pretty much around the country now will help many people buy this Spring.
For first home buyers, this Spring is a great time to buy. You won’t feel as much pressure in this changing market, you’ll have more properties to choose from and you’ll likely pay less than last year.
With interest rates now rising, your mortgage repayments will be more expensive than last year. But over the life of a 25 or 30-year home loan, you’ll pay low rates for periods and high rates for periods depending on the health of the broader economy. So, it’s normal. The long-term average loan rate in Australia is above 7% and even after recent increases, we’re still well below that now at 3% to 4%.
It’s also important to remember that property is a long game. The first property I bought was an inner city terrace for $96,000. That amount of money seemed like the earth to me at that stage, but over time it always looks cheap. You’ll look back on your purchase today and think the same way.
Recent data released by the Australian Bureau of Statistics shows almost seven out of 10 first home buyers are purchasing with a partner or spouse.
About one in five are getting help from the Bank of Mum and Dad. More than 65% are using various forms of government assistance, such as a First Home Owners Grant or a stamp duty exemption.
Tips for first home buyers this Spring
The most important thing to do is buy in the best location you can afford. You can always change what's on the site, but you can never change the size, location, or aspect so always prioritise these elements.
The aspect is critical. No amount of impressive décor matches the feeling you get from a property that is bathed in sunlight. The ideal situation is a north or north-east aspect to the rear of the property if it’s a house, or to the main living areas of an apartment.
If you can afford to buy a house in a good location, do that. History shows that houses will always outpace apartments when it comes to capital gains. But if you don’t have the budget for a house – or one in a good location – then buy the best apartment you can afford.
If there is scope to improve the apartment and add immediate capital value, that’s even better.
After that, focus on the bones of the property: Ceiling height, views, the floorplan and any common areas of apartment buildings. Don’t ever buy without getting builder, pest and strata reports.
I wish all young first home buyers out in the market this Spring the best of luck.