So what are the 2012 first home buyers doing? Frank Valentic

Frank ValenticDecember 8, 2020

So what are the first home buyers doing in the market now? They are struggling to make the transition to home owners as they have in every generation. I can remember being a first home buyer in 1994 and I had the same problem trying to get into the market. One year later and having missed out on three more affordable properties, I ended up getting into the market with my first home in Brunswick East in 1995, a three-bedroom brick Edwardian for $168,000. Prices have increased by 10% each year since, making affordability a real issue for first home buyers.

Our buyer’s agent company over the last 12 years has seen what works and what doesn’t work. So  our top five tips for first home buyers across Victoria at the moment are:

  1. Seek professional advice from experienced professionals or family/friends

    An experienced mortgage broker, buyer’s agent/advocate, building inspector and solicitor can give you the advantage when it comes to securing your first property. They are the key people whose experience you should tap into and seek help from. Remember, there is no need to reinvent the wheel. Invest in taking a few experienced property professionals or savvy property buyers for a coffee and learn from their tips and avoid the mistakes they made.

  2. Do your research and be ready

    Make sure you have your finance pre-approved (in writing) and have at least a 5% deposit in a bank account that’s ready to go. If money is in an ING account, move it a few days earlier as it will take a few days to transfer the funds. If the right property comes up, you can bid unconditionally at the auction or make a strong private sale offer. Stay at home or in a cheaper share rental accommodation with others so you can save up that elusive first deposit. Set up a savings budget and subscribe to the many budget plans there are now online.

  3. Do your due diligence

    Visit different types of properties (houses versus townhouses versus units) and different suburbs/areas and work out what properties and areas match your lifestyle. It may be better to buy an apartment in the inner suburbs that you will enjoy living in, versus a house in the outer suburbs that meets your accommodation requirements but doesn’t match your lifestyle. Then visit at least 20 properties in the area you have shortlisted so you get a good foundation of the comparable sales in that area.

  4. Do your research and due diligence

    Make sure that you have a solicitor/conveyancer review the contract before signing and always organise a building/pest inspection prior to purchasing or make the offer subject to a satisfactory report. Ring the local councils and ask about any proposed developments and if it is in a unit complex, contact the Owners’ Corporation and ask about any building issues or proposed special levies.

  5. Don’t get too emotional when negotiating

    It is easy to get carried away and expose yourself to over-paying for the property. Set a limit that is within your pre-approved budget and stick to it (within reason). Always have a family member/close friend or buyer’s advocate/agent who has had experience in negotiating or bidding at auction negotiate on your behalf and stop you from getting carried away as there will always be other properties. Sometimes you will need to walk away and wait for another door to open.

So what can be done to help first home buyers further?

  • Stamp duty savings: The State Government’s announcement in the new budget that they would continue with the current 20% stamp duty reduction and a further 10% in January 2013 and a further 10% in both January and September 2014, totalling 50% was widely supported by real estate professionals. Now there needs to be more promotion of these incentives which can amount to up to $5,000 for purchases under $600K.
  • Follow the New Zealand model: As in New Zealand, allowing first home buyers to access their voluntary superannuation contributions and have it paid back in a certain number of years. This would assist more first home buyers in saving that elusive deposit and getting a foothold in the market.
  • Stamp Duty lay-by scheme: The REIA and REINSW recently proposed a “lay-by scheme” where first home buyers could pay back stamp duty over a three year period. With stamp duty amounting up to $35K for purchases up to the $750K maximum to qualify for the grant, a lay-by scheme would assist more FHB. 
  • Savings Account: The government’s FHB Savings Account program has not really assisted anywhere near as many first home buyers as the government would have wanted. Another scheme that works and is well promoted needs to be implemented.

    In summary, first home buyers are the most important piece of the property market jigsaw puzzle. First home buyers demand underpins our property market as it then encourages investors and the next middle group of buyers to “upsize” or trade-up. It will be interesting to see how many more first home buyers enter the market with rates reducing further.

    First home buyers’s activity affects price movements and when interest rates start dropping, this also brings out more investors in the market. There are a definitive number of first home buyers out in the market, averaging around 21% over the last 21 years and the recent incentives have just encouraged these buyers to purchase earlier.

    The State First Home Buyer’s new property grants of $13,000 expired on June 30 2012 in favour of a broader market stimulus through first-home buyer stamp duty cuts.

    A 20% discount had previously been introduced, with another 10% discount to follow from January 1, 2013.

    The recent high demand has fallen off from a peak of 30% to a low of 15% and it will take a while for first home buyers to increase to high levels again.

    This article was written by Frank Valentic, Buyer’s Agent of the Year REIV (2007, 2009) REIA (2008, 2010), and Managing Director of Award Winning Buyer’s Agency, Advantage Property Consulting.

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