"Is now a good time to buy a first home or should I wait? Do you think property prices will drop further when the mortgage freeze ends? As a solo first home buyer, I am struggling to find affordable homes at the moment."
Eloise in Sydney, NSW
Top answer provided by:
Colin De La Nougerede
Hi Christine,
Thanks for your questions. Firstly, let me state that I cannot provide you advice to buy or sell a property this should be done by a suitable qualified property consultant, but I can provide you my take on the current property market and your specific questions asked.
Your questions are quite broad and not knowing your personal circumstances, I will try and provide a general overview for you then answer your specific questions:
I am not sure what state you reside or where you are considering buying your first property but with the effects of Covid 19, the markets all over Australia have been affected in some way.
To assist you in your decision process, I have included a link to the Australian Government First home buyer’s assistance scheme to help with further specific information for your respective state.
With the Governments additional assistance grants currently available, subject to what type of dwelling you are considering, you may be able to get a grant of up to $55,000. Canstar’s Guide can provide further eligibility criteria to your respective State.
Please note this area and eligibility criteria is quite detailed, so take the time to apply what is specific to your situation or seek the appropriate property advice.
Now to answer your specific questions:
1: Is now a good time to buy a first home or should I wait.
What I can say is that with current effects of the Coronavirus, it has provided some great opportunities to get into the market as property values have declined and due to the restriction of activity in the marketplace it has created some good buys. The feed back I have been getting from my real estate clients is that this has now started to pick up with some of the easings in restrictions and is starting to have a positive effect on prices increasing due to supply and demand. I am in WA so this may vary in other states especially in Victoria currently but will assume this may be consistent around Australia due to the decline in the market. From all data received, the first homeowner market is moving faster than the capability of savings for those who are waiting especially with all the assisted grants and subsidies available.
Another factor is if you are requiring borrowing funds (I am not aware of your personal situation here) it is the cheapest it has been for a long time and I do believe it will get cheaper. With all the banks and lenders competing for the consumers business, there are some really good deals from an interest point of view. On this note, get the most appropriate mortgage advice that best suits your needs, not just the interest rate being offered. Get your bank or Mortgage broker to answer all the pertinent questions specific to your needs. There are some really good guides available and the Canstar site is a good place to start if you are unsure of what you are seeking.
The following should be considered with your decision to buy now or wait.:
- Market values are reasonable to fair value and you may be able to negotiate a good deal in the right location. Overall, I do think the real estate markets have been quite resilient considering, but If “you don’t ask you don’t get “so try and drive a bargain that is within your affordability and cash flow needs, which is the priority. Be aware that due to all the subsidies offered some prices are getting driven up – so make sure you ask the question.
2: Do you think property prices will drop further when the mortgage freeze ends?
This is quite a hard question to provide a yes or no answer as there are many variables that can affect the outcome, the following being that the freeze is on existing mortgage holders that have opted to take up the offer.
Some variables include:
- Post the mortgage freeze, does the existing mortgagees still have the capacity to service the debts.
For example, do they have a job or have to sell?
Plus, can they afford to sell if they owe more than what the value of the property is currently worth due to recent decline.
- Two possible outcomes from this situation. If forced to sell or can’t afford to retain the property-
and this is consistent to the overall market, we will see an oversupply of properties on the market which will have
a possible decline in overall prices (again a good buying opportunity)
- If some economic stability is created and we get back to some normality (if ever) and banks/ Lenders
assist the Consumer/Mortgagee to manage this transition, I don’t see a decline but a status quo and a possible increase in
property value of the ones available for sale.
There are other variables that may need to be considered. For example, further property developments and land sales availability to come on the market.
3: As a solo first home buyer I am struggling to find affordable homes at the moment.
One thing I can advise if you already know that you can not find an affordable home that meets your requirements and cash flow, the worst thing you could do is commit to something you know is unaffordable and then become a statistic. It would be prudent to step back do the numbers again, look at your savings capacity so you can reduce any borrowing (if applicable )and make it affordable so you get the benefit from your hard-earned money. Maybe you may need to change the type of dwelling you are considering benefitting from all the government grants available or location of your new home.
Buying your first home is an opportunity to get into the market and it is an exciting venture but do this on your terms that you have control of. I do believe it is a good time to seek opportunities, but from experience, your first home will not be your dream home but it is a steppingstone to your future home. If you make the right decision today you will benefit for the long term with some comfort to know you can control your own destiny.
In summary
- Yes, there is an opportunity right now but make sure it is suitable and right for your long-term planning.
- I am not sure how much the property market will decrease or increase but with the availability of Cheap money to buy,
I don’t not see a drastic reduction in values going forward.
- Maximize any government-assisted grants available to you to provide the best financial outcome.
- Do your research and don’t make a decision you are not comfortable with.
- Make sure it is affordable and not stretching the budget too much.
As you can see there are a lot of variables you would need to consider getting the appropriate outcome. My advice is to think of what you want to achieve and are concerned about, seek the appropriate advice from a suitably qualified adviser to explore your options going forward. Most good advisers offer a first appointment free of charge to better understand your personal circumstances as everyone is different, get the advice that best suits your needs.
Hopefully, this has assisted in some way-Good Luck.
Regards,
Colin
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