25 May 2018

Why now is a great time for first home buyers

For young Australians with their sights set on buying property, now is a great opportunity for first time buyers to lock down a somewhat ‘affordable’ piece of real estate.

So what is causing the market to change and open doors for the younger generation to finally spend their hard earned savings on property?

Investors are slowing down

The huge force that has stood as the primary competition for first-time buyers has been investors. To even out the real estate playing field, banking regulators have tightened their rules, to limit the availability of credit for investors. Similarly, governments have also started to increase taxes for foreign buyers and banks have become stricter on these individuals trying to get home loans in Australia. These protocols have cut out a solid chunk of competitors within the market for younger Australians to pursue their property dreams.

Banks are offering special loan products

Banks have started coming out with specific loan products tailored for first home buyers. An example of this is a 3 year fixed rate loan at a slightly reduced rate. This option means that first home buyers feel certainty about their repayments for the first 3 years of their loan with no surprise rate increases. This option also allows for an offset feature, which is essentially a savings account linked to the home loan. For new mortgage holders, it means the interest payment due on the loan is calculated only on the net balance of the loan less the savings account.

Government incentives

Government incentives for first-home buyers have been around for numerous years. However, in previous years whilst the property market was booming, these incentives held little relevance due to the hugely inflated property prices. Since prices have fallen over the last 12 months, the incentives hold more appeal. In NSW, there are three options for first home buyers*:
• Stamp duty exemption for properties under $650K and concessions for properties up to $800K
• First home owners grant of $10K for new homes not exceeding $600K or for those building their own home where total cost does not exceed $750K
• First Home Super Saver (FHSS) scheme allowing voluntary contributions to be made into ones super fund, with a maximum of $30K to be released to use towards the purchase of a first home

* For incentives in other Australian states and territories, check the Office of State Revenue website.

This article was contributed by REBAA affiliate member https://rebaa.com.au/members/1st-street-financial/.