Australia’s largest professional body of independent buyers’ agents is warning first home buyers not to jump head first into buying property based on government incentives alone.
Prime Minister Scott Morrison and Labor have both agreed to offer loan guarantees for first home buyers which will allow them to buy their own home with a five per cent deposit.
The scheme, which kicks off on 1 January 2020, will be available to individuals with a gross income of up to $125,000 or couples with a gross income up to $200,000.
Real Estate Buyers Agents Association (REBAA) president Rich Harvey said if the market continued to fall in certain locations, first home buyers could risk being caught in negative equity.
“It’s all well and good to jump on the property ladder as long as the ladder isn’t leaning on the wrong wall in the wrong suburb,” said Mr Harvey.
“It’s certainly not a bad time to buy property but there’s a lot of uncertainty out there and no-one knows when the bottom of the market will hit. That’s why property selection is crucial in this market. As a first time buyer, if you get it wrong, it can be a very long and protracted process to get out of but if you get it right, it can set you up for life.”
According to the latest housing figures (November 2018) released by the Australian Bureau of Statistics (ABS), first home buyers account for 18.3 per cent of buyers.
This figure peaked in May 2009 at 31.4 per cent driven largely by the First Home Owners Boost which was introduced by the Federal Government in 2008.
“Historically, what these announcements do is increase demand but not supply,” said Mr Harvey.
“First home buyers can get so caught up in the frenzy to buy before the incentive runs out that they fail to properly research the market. Buying a house is the largest financial investment decision a person is likely to make in a lifetime. Using a professional independent buyer’s agent can take the stress and uncertainty out of this emotive purchase.”
Here are REBAA’s tips for first home buyers:
Be realistic
Many first home buyers need to recalibrate their expectations and go for something more modest for their first home. In the age of entitlement, you can’t get the dream home in the first year. It’s important to be patient and to realise that you may need to trade up three or four times to achieve that goal.
Get a buyer’s agent to bid for you at auction
First home buyers particularly tend to shy away from auctions as they can feel intimidated by the sales agent’s behaviour but our advice is to get a buyer’s agent to represent you for a modest fee. They know the moves to make and how to tip the odds in your favour. Visit www.rebaa.com.au for an accredited buyer’s agent near you.
Rentvesting
If you can’t afford to buy where you want to live, just rent there and buy an investment property in a growth location that is more affordable. Get advice from a REBAA accredited buyer’s agent, one that knows the local market and can give you sound advice and help search for the best investment property. The key thing is to have your money working for you!
Use equity with friends or family
Do a joint venture with a trusted friend to get into a property. Make sure the joint venture agreement is drafted by a solicitor and is clear cut. Be aware that you will be jointly liable for the loan repayments. Parents should be very careful about offering to go guarantor – better to simply gift some equity than have responsibility for the entire loan.
Look at ways to add value
Renovations are one of the easiest ways to add value to a property and don’t need to be extensive. It may be simply ripping up the carpet or the floor boards, re-doing the kitchen, adding a bedroom or painting inside and out. Another option is to look at property with subdivision potential or increase yield with a granny flat.
