Will 2024 be the year of the "bridesmaid suburb" for homebuyers?

The property market has been hard to get a fix on in 2023. Despite the higher cost of living and slumping consumer sentiment, property prices in popular areas have continued to climb. 

Throw in this year’s rising home loan interest rates and you could forgive a few would-be buyers for packing it in and turning to end of year shopping.

But hold on, not all is lost. One of Domain’s predictions for 2024 is that buyers will start to explore “bridesmaid suburbs” and areas they initially overlooked. Could this be a good strategy to try? 

Domain’s chief of research and economics, Nicola Powell says yes, these suburbs are down the road and much cheaper than the top suburbs in which everyone wants to live. It makes sense to cast a wider net.

“It’s about thinking through areas you may have once overlooked,” says Powell. “If you think about some of the suburbs of Sydney 10 years ago nobody would have touched with a barge pole, are now the hip and happening areas to reside. Wherever you are, you can pick those areas.” 

Good point. It took a while for the inner west of Sydney to become as popular as it is now, for example. Certainly suburbs such as Dulwich Hill and Concord weren’t always at the tops of buyer wishlists. But savvy buyers saw the potential in these spots about a decade ago and capitalised on relatively lower prices. 

In 2018, the median house price in Dulwich Hill was $1.5m and just 5 years later the median price is $2m, as per the REA Group. Ten or 15 years ago, buyers would have paid even less because the premium was placed on suburbs closer to the CBD such as Erskinville or Leichhardt. 

Your immediate market will continue to evolve, of course. Now buyers might have to look even farther afield to make this strategy work, but it’s still a valid way to go about finding a lower price point. 

Handling homebuyer competition

Another challenge faced by homebuyers in bigger cities is competition - a factor that only seems to increase in major hubs like Sydney and Melbourne. The two forces at play here are heightened demand, caused by an increasing population, and lower housing supply due to a lack of suitable planning. 

“I think under-supply has been in the spotlight in 2023,” says Powell. “For first homebuyers it’s actually very challenging. They’re facing very tight rental markets, the hardest rental market that we’ve ever seen, record pricing and higher levels of debt. 

“And it isn’t an undersupply that’s just happened this year. This has been over many years, where we haven’t built enough homes to meet population growth. This all feeds into affordability [or lack thereof]. 

“So when you look at our [Domain] trends for 2024, I do think governments are taking the supply side seriously.”

Specifically, Powell refers to the government’s housing accord and its promise of 1.2 million new homes over the next five years. She says that the pressures in property markets in 2023 puts even more weight on the delivery of those homes. 

Right time to buy property?

Powell says there will be windows of opportunity to buy a home, but your perspective of what a window is matters.

“I think it’s not about timing the market or trying to pick a trough or follow a peak, it’s about timing the market when it’s right for you,” she says. “Everyone’s circumstances are different and it’s really important to not be scared to purchase when prices are falling, or when they’re rising. Because if your vision is for a long-term home, you’re going to ride the waves of numerous property cycles. 

“A home isn’t a quick purchase - it’s a large investment where you need that longer term approach.”

Once you consider the market, a few bridesmaids suburbs and perhaps even what help you're entitled to from the government, your long-term budget is the next crucial step. This is where home loan research is required.

Home loans are designed to get you into a position to buy over the long-term, where you’re only having to make an initial deposit to secure the property. However, it’s the long game that really matters, understanding how you’ll meet the demands of regular home loan repayments, with interest, and over many years. 

To help get you started with this, we turned to another expert. Below we offer some tips from Rebecca Jarrett Dalton of Two Red Shoes, mortgage brokers.

Tips to help with your first deposit and home loan budget

Jarrett Dalton admits that a first home purchase can be a hard slog but you can do it by setting achievable goals, marking them on a timeline and making sacrifices to reach each target. 

“Make sure your timeframe is reasonable, based on your necessary expenses and then make smart decisions around what you’ll avoid to achieve your goal,” she says. “Then just do it. Your ability to go ‘without’ will surprise you if you are determined and have a deadline.”

• In addition, she says a bit of extra money will help with your budget. So why not try the following:

• Sell assets that aren’t being used, clean out closets and sheds and sell items on a well-known marketplace.

• Pickup additional shifts at work or second jobs – do you have a skill that you can market in the gig economy?

• Consider government schemes available like the first home super saver scheme or the home guarantee scheme.

• Think about moving back home with your parents and saving for a period of time.

• Do you actually need a deposit – can you utilise a family pledge to buy your home? Buying with a family pledge makes it easier to get your home loan approved because your family member acts as a guarantor. In short, they offer your lender security. But this isn’t for everyone and is worth discussing with a financial expert. 

Finally, some simple research goes a long way. At Mozo we offer a handy home loan calculator to help you crunch the necessary numbers. Above all else, we compare some of the top home loans on the market. Start your comparison journey below!