Narrowing gap between rental price and home loan repayments.

Wednesday 13 March 2013

Article by Mozo

Despite the current low cost in home loans and the high prices of renting, it's not first-home buyers who are rushing into the property market.

The closing gap on home loans.

First-home buyers made up just 14.9 percent of all borrowers in December, down from 15.8 percent in November, to the lowest level since 2004. However the current climate on the property market is finding a large appeal amongst investors, reports the Sydney Morning Herald.

"First-home buyers struggle to get a deposit together, so there's going to be more of a rental crisis. That's good news for landlords," says Andrew Ienna, director of Laing+ Simmons in Blacktown.

And it's no wonder it's tempting for investors, with interest rates at a current low and high rental income almost guaranteed. Rental vacancy currently sits around 2 percent, making paying off the property look like a cinch to investment buyers.

"It gets most tempting for investors when mortgage rates get below 5 percent. Especially if we get some renewed gains in rents and clear stabilisation prices, that'll encourage more investors in the market," said Matthew Hassan, Sydney- based senior economist at Westpac.

Tim Lawless, residential research director at RP Datab says, the market will eventually come to a balance. Once rental prices become too high, purchasing will become an obvious option. However, first home buyers will likely have to lower their expectations.

"If we can't afford to buy a detached house, lets buy a unit. If we can't afford to buy in the inner ring, let's try in the middle suburbs," said Mr Law.

First home buyers can significantly lower the barrier to owning a property by sourcing the best mortgage, through a home loan comparison and significantly reduce the amount of interest owing on their purchase.

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