First homebuyers lunge for the property ladder

By JP Pelosi ·

There's been some doom and gloom around the property market in recent months, chiefly because demand is said to have dropped. Demand really drives real estate, especially when it’s from investors. 

However, investors appear to have cooled on the market lately, meaning first homebuyers might finally have a chance to get a home. The question is for how long?
 
Mozo's property expert Steve Jovcevski says that for those with income security, now is an exciting time to get into real estate.
 
"Prices may come down more and with less competition at open inspections, first homebuyers might have a chance to buy into a suburb that a few months ago they may have thought was out of reach," he says.
 
Jovcevski adds that purchasing is easier than refinancing at the moment because generally first homebuyers have fewer expenses than their older counterparts, many of whom already own property.
 
"Ironically the current COVID-19 crisis means prospective first homebuyers have cut back spending due to the lockdown," says Jovcevski. "As lenders look at recent spending patterns to determine the size of the mortgage you might secure, lower spending levels mean you should be able to borrow more.”

Good circumstances for ready homebuyers

A number of property experts have also touted ideal economic circumstances for younger buyers right now, including Australia's record low interest rates and flexible home loan products, which allow for smaller deposits in some instances.
 
There's also historical precedent, something any good property buyer should read up on, young or old.
 
Chief executive of Positive Real Estate, Sam Saggers says that during the last downturn after the global financial crisis, there was a $21,000 first home owner grant that influenced people to buy real estate. He says the years that followed saw boom times in Melbourne and Sydney, a time when property values almost doubled.
 
Now, with the new first homebuyer scheme, Saggers says first homebuyers are again a focus of our government and economy, which means opportunities are being created to help these buyers.
 
"Real Estate is a big rock of economics, so governments use it to stimulate growth as the spin off jobs are so huge," says Saggers. "Think furniture sales shops, electronics, household goods, electricians, plumbers, roads and infrastructure to new areas. All link to the sale of property.
 
"When someone buys a new home, they are likely to buy many other consumables and so real estate is often protected and used to regrow economics. It was certainly the case in the 2008 crisis."

Plus, there’s currently a limited number of buyers in the market, according to Saggers.
 
"Right now may be one of the best opportunities to buy well - a once in a lifetime opportunity to leave the rental pool and become a homeowner," he says. "Once the government creates the 'wealth effect' and makes it too easy not to pass up on real estate, you want to be in the market not out of it.
 
"Real estate could rise at a staggering level. So, buying now is not about losing money: it's about not overpaying and positioning yourself for 2021 and beyond."

Is there enough real estate action?

Recent numbers out of the auction scene indicate a lifting mood among buyers. And yet, there are fewer properties available overall.

For example, SQM Research counts the number of ‘for sale’ listings, which can be informative when you're looking to buy.
 
SQM says residential listings fell in April by 5%, from 307,847 back in March to 292,775. And compared to 12 months ago, listings were down by 12%, which is a big drop in the property world.
 
The largest decrease was in Perth with an 8.4% fall, followed by Sydney at 7.2% and Adelaide and Darwin both posted 6% decreases in property listings. Hobart had the smallest drop at 4.3%.
 
So, listings are down but keep in mind that in many cities the level of activity was relatively high to begin with. Equally important to understand is how this impacts prices.
 
CoreLogic's head of research Tim Lawless recently noted that although housing values were generally positive over April, the overall trend has been a weakened marketplace since mid-to-late March. In fact, CoreLogic estimates property sales plunged by around 40% in April as buyers retreated to the sidelines and listing numbers dried up.
 
This downward shift occurred in line with social distancing policies and the dramatic fall of consumer sentiment, which was reported by the National Australia Bank, among other organisations.
 
Lawless added that the substantial drop in sales activity is supported by a similar fall in the number of mortgage related valuations, meaning the number of people seeking a valuation to either buy or sell.

How small is the window for property bargains?

If you saw last weekend’s news, you’ll have noted more people have started to front-up to auctions. This will presumably continue as COVID-19 restrictions ease.
 
Supporting this, CoreLogic says that while the past few weeks have seen fewer scheduled auctions, an uplift could happen sooner rather than later.
 
"With news that the NSW and WA state governments are lifting the ban on onsite auctions and inspections, with other states likely to follow suit, auction volumes could potentially see an uplift sooner than expected," CoreLogic RP Data reports.  
 
Yes, the recent market has been impacted by a combination of low sentiment, tough selling conditions and policies preventing open homes and on-site auctions. However, the gradual easing of restrictions might mean homebuyers have a rather small window before the competition jumps back in.
 
In fact, among the younger buyer cohort, the competition might just be waiting in the wings. The Real Estate Institute of Australia recently advised that the number of owner occupier first homebuyer loans in March increased by 1.3% (seasonally adjusted) and by 21% for the year. 
 
Ultimately, any prospective buyer needs to do their homework, regardless of how much competition there is. Take time to work out a budget and get a good grasp of all the costs before going ahead. Having a strategy and calling on a financial advisor can help with this.
 
If you're ready to start researching, take a look at our home loan comparison tool to find a home loan that suits you.

JP Pelosi
JP Pelosi
Managing editor

Jean-Paul (JP) Pelosi is an experienced journalist and editor who has contributed to many of Australia's leading media outlets including The Guardian, News.com.au, Domain.com.au, Investment Magazine and ANZ's Bluenotes. He has also edited news and communications for large financial services companies such as CommBank, Suncorp, Allianz and Amex. He loves a well told story and applying his editorial experience to content that readers both care about and enjoy. JP heads up our writing team.