If I was a first home buyer where would I look?

The other day someone asked me if I was a first home buyer where would I choose to buy?  It’s a tough question, particularly if I was looking to buy my first home in Sydney where the median house price is now just over $700,000.  Casting my mind back to 2002 when my wife and I bought our first home in Brisbane, here are the key things we were looking for:

• Top of our list was something that we could afford – we had a stretch budget of about $250,000.

• The second priority was to buy a home we thought would appreciate in value – we would eventually want to upgrade and viewed our first home as a stepping stone to something ‘more comfortable’.

• Third was that we wanted a detached home with a backyard.

• There were a few other considerations: we wanted a location that wouldn’t take too long to get into the city (where we both worked) by public transport, ideally the home would have at least three bedrooms; I wanted a man cave/shed while my wife was keen   for some entertaining space such as a back deck.

Here’s the house we settled on – an original  and unrenovated post-war home with three bedrooms in Moorooka on 607 square metres of land.  Moorooka is about 10 kilometres south of the Brisbane CBD and at the time wasn’t high on the desirability scale for most buyers.  The kitchen was an original and in typical 50s style.

We did a lot of our own renovations over time like ripping up the carpet to expose the wooden floors, painting and some basic landscaping.  While the home was rough around the edges and not all that comfortable, it was well connected to transport (option of train or bus), had decent arterial road connections (M1 Motorway / Ipswich Road / Beaudesert Road), I had a shed downstairs that was almost high enough to walk under without stooping and we could entertain in the back yard (as long as it didn’t rain).  We paid $245,000 and sold the property for $350,000 four years later.

It’s hard to draw parallels between market conditions back in 2002 and now; the median house price at Moorooka has risen to $500,000 which is more than double what it was back in 2002.  I think if I was a first home buyer today I would probably have fairly similar expectations – stick to a budget that doesn’t  stretch the  finances and entertainment fund too much, look for an area that is likely to appreciate in value – ideally a detached home (but I appreciate that is becoming more difficult due to pricing in many locations).  I think I would be we willing to sacrifice a bedroom, opt for a smaller backyard and lose the man cave if that meant buying closer to where I worked and played.

Interestingly, a survey recently commissioned by Aussie and undertaken by RP Data showed the top five considerations for first home buyers were:

Rank      Factor

1).             Affordability

2).             Number of bedrooms

3).             Garage / off street parking

4).             Capital growth

5).             Proximity to public transport

So, based on the average first home buyer loan size across each state and allowing for a 20% deposit, here are my personal picks for buying a detached home as a first home buyer.  Please note that I am not providing any advice here.  Readers should undertake their own research and determine the suburbs that are best for them based on their own due diligence, budgets and preferences.

Over the next couple of pages I have provided tables that outline the full list of suburbs that suit the selection criteria (ie a median house value that is equal to or less than the average first home buyer loan size plus 20%).  I would be very interested in reader views on where they would be seeking to buy based on these suburbs or areas outside of the list.

Click through to the next page to read Tim's breakdown of each city.

Sydney:

Being a first home buyer in Sydney is tough.  The median house price is the highest of any capital city at $705,000; for this reason many first home buyers are either blocked from the market financially or they choose more affordable locations located far from the city centre which are often not as well serviced by transport options and other necessities such as schools, health care, retail and social options.  Alternatively, more first home buyers are sacrificing the back yard and opting for higher density living such as a town home or apartment.  Personally, I think Sydney is the only city where I would be seeking an apartment over a house so I could buy closer to the city and social precincts (but I have stuck to the theme and selected a suburb for detached housing)

The average first home buyer loan size in NSW, based on the September housing finance data from the ABS was $298,500.  Adding a 20% deposit we can assume the typical first home buyer in NSW is spending around $360,000 on their first dwelling.  There are 71 suburbs across the Greater Sydney metro area with a median house value of $360,000 or less.  Most detached houses with a median value at or under $360,000 are located a long distance from the city, mostly around the Central Coast, Campbelltown and Blacktown.

My pick for a house within this price range is the suburb of Cambridge Park, located in the Penrith council region.  The suburb is located about 45 kilometres from the Sydney CBD and is reasonably well serviced by transport options; the Western Motorway is in close proximity, as is the Kingswood and Penrith train station.  The median house value at Cambridge Park is $350,570 and last year there were 101 house sales of which 85% sold under $400,000.  The average block size at Cambridge Park is 696 square metres, so most detached homes have large yards.

Melbourne:

Melbourne dwelling values have risen by almost 55% since the beginning of 2007 which has created some affordability barriers for first home buyers in the local market place. The median house price for Melbourne is now $595,000 which is still a lot less than Sydney’s ($705,000) but much higher than it was before the three cycles of growth the market has been through over the past six years.

The average first home buyer loan size in Victoria, based on the September housing finance data from the ABS was $280,300.  Adding a 20% deposit we can assume the typical first home buyer in Vic is spending around $340,000 on their first dwelling.  There are 39 suburbs across the Melbourne metropolitan area where the median house value is less than or equal to $340,000.  Most detached houses with a median value at or under $340,000 are located around the city fringe in the council regions of Casey, Melton, Brimbank and Hume.

My pick for a suburb to buy a first house within this price range is Hoppers Crossing which is located in the Wyndham council region about 23 kilometres west of the Melbourne CBD.  The suburb is serviced by its own train station and has efficient access to the Princes Freeway.  The median house value at Hoppers Crossing $334,600 and last year there were 492 houses sold, of which 88% were priced under $400,000.  The average land area at Hoppers Crossing is 625 square metres, highlighting that this suburb typically shows large block sizes for detached housing.  

Brisbane:

Brisbane’s housing market has been much more sedate when it comes to capital growth over the past five years. From January 2009 through to October 2013 Brisbane dwelling values have risen by just 1% compared with a 36% rise in Melbourne values and a 35% rise in Sydney values.  The lack of capital gains across the Brisbane market has provided a substantial improvement in housing affordability compared with the other major capital cities.  In fact, the median house price for Brisbane, at $453,000, is 36% lower than Sydney’s median house price and 24% lower than Melbourne’s.  For first home buyers this means housing options closer to the city tend to be more diverse and available.

The average first home buyer loan size in Queensland, based on the September housing finance data from the ABS was $273,500.  Adding a 20% deposit we can assume the typical first home buyer in Queensland is spending around $330,000 on their first dwelling.  There are 79 suburbs across Greater Brisbane with a median house value equal to or lower than $340,000, with most of these suburbs located around the city fringe in the council regions of Ipswich, Logan and Moreton Bay.

My pick for a first home buyers suburb within this price range for houses is Strathpine which is located within the Moreton Bay council region about 19 kilometres north of the Brisbane CBD.  The suburb of Strathpine is serviced by a train station and has efficient access to the Gateway Motorway, Bruce Highway and Gympie arterial road.  The median house value at Strathpine is about $333,000 and over the past year there have been 127 houses sold of which 91% had a sale price of $400,000 or less.   The average land area is 698 square metres suggesting most houses are positioned on a large block of land.  

Adelaide:

Adelaide’s housing market has been relatively quiet over the current growth cycle with dwelling values rising by just 1.9% over the twelve months to October 2013.  Since the beginning of 2009 Adelaide dwelling values have increased by 27% compared with 38% in Sydney, 54% in Melbourne, 21% in Brisbane and 8.5% in Perth.  Adelaide is the most affordable mainland capital city with a median house price of $390,000.  Such an affordable market potentially provides first home buyers with an easier entry point to the housing market and more diversity in their options.

The average first home buyer loan size in South Australia, based on the September housing finance data from the ABS was $229,900.  Adding a 20% deposit we can assume the typical first home buyer in SA is spending around $276,000 on their first dwelling.  There are 36 suburbs across Greater Adelaide with a median house value equal to or lower than $276,000, with most of these suburbs located to the north of Adelaide in the Playford and Salisbury council regions.

My pick for a first home buyer seeking a house in Adelaide would be O’Sullivan Beach, located in the Onkaparinga council region about 25 kilometres south of the Adelaide CBD.  The suburb used to be one to be avoided due to the oil refinery, however the refinery is long gone and there is a large amount of capital works underway in the Onkaparinga area including an extension of the railway line and upgrade of the expressway linking to Adelaide which will substantially boost accessibility to the area.  The median house value at O’Sullivan Beach is $248,450 and there have been 35 house sales over the past 12 months with 89% of these sales under $400,000.  Block sizes are large, averaging 672 square metres.  

Perth:

Perth’s housing market has had a strong run in values through early 2013 however the market is now slowing down.  In fact Perth values fell by 0.6% over the three months ending October 2013 but are 6.9% higher over the year.  The longer term growth rate has been quite sedate in Perth with dwelling values rising by 8.5% since the beginning of 2009.  Over the same period Melbourne values rose 54%, Sydney values were 38% higher and Brisbane values were 21% higher.  With a lower rate of growth over the past five or so years, the relative affordability of Perth houses has improved compared with Sydney and Melbourne.  With a median house price of $508,000, Perth houses are on average about 28% lower than Sydney’s and 15% lower than Melbourne’s

The average first home buyer loan size in WA, based on the September housing finance data from the ABS was $315,300.  Adding a 20% deposit we can assume the typical first home buyer in WA is spending around $380,000 on their first dwelling.  There are 29 suburbs across Greater Perth with a median house value equal to or lower than $380,000, with most of these suburbs located in the council regions of Swan, Armadale and Kwinana.

My pick for a first home buyer seeking a detached house in Perth is Lockridge, located in the Swan council region.  Situated just 11.6 kilometres from the Perth CBD, Lockridge is the most affordable suburb within 12 kilometres of the Perth CBD and is strategically located with relatively efficient road access via the Tonkin Highway and Guildford Road and the Great Eastern Highway.  Additionally, Guildford train station is close by for public transport.  The suburb’s close position to the city and transport is likely to see housing stock improve over the coming years as more buyers looking for affordable properties that are well serviced choose to live in this area.  The median house value at Lockridge is $353,700 and there have been 59 house sales over the past twelve months, 78% of which were sold at a price under $400,000.

Tim Lawless is national research director of RP Data.

You can contact Tim on Twitter.

Click through to the next pages to see tables relating to capital cities:

Sydney - page 3

Melbourne - page 4

Brisbane - page 5

Adelaide - page 6

Perth - page 7
 

TABLES:  Suburbs with a median house value which is equal to or lower than the typical first home buyer loan amount (plus 20% deposit)

Sydney suburbs with a median house value of $360,000 or less

TABLES:  Suburbs with a median house value which is equal to or lower than the typical first home buyer loan amount (plus 20% deposit)

Melbourne suburbs with a median house value of $340,000 or less

TABLES:  Suburbs with a median house value which is equal to or lower than the typical first home buyer loan amount (plus 20% deposit)

Brisbane suburbs with a median house value of $330,000 or less

TABLES:  Suburbs with a median house value which is equal to or lower than the typical first home buyer loan amount (plus 20% deposit)

Adelaide suburbs with a median house value of $276,000 or less

TABLES:  Suburbs with a median house value which is equal to or lower than the typical first home buyer loan amount (plus 20% deposit)

Perth suburbs with a median house value of $380,000 or less