Ask our Advisors - Is it the right time to buy my first home?
QUESTION
"Is now a good time to buy a first home or should I wait?
Do you think property prices will drop further when the mortgage freeze ends?
As a solo first home buyer, I am struggling to find affordable homes at the moment."
ANSWER
Purchasing your first home is always an exciting milestone but it can also be a huge emotional rollercoaster.
Trying to pick the perfect time to buy a property is tricky at the best of times. There are so many different factors that affect property values (interest rates, the economy, and government policies for example) that in the short-term it is nearly impossible to guess whether markets will rise or fall with any real accuracy.
This gets even trickier in the current pandemic - on one hand, there is the potential for the rise in unemployment, the uncertainty around job security, coupled with the fall in migration & population growth to help pull property prices down.
However, on the other hand record low-interest rates & government incentives are helping people afford to borrow more than ever before and the possibility of a vaccine rolling out in 2021 is starting to increase people’s confidence in job security and the economy.
Property is often an asset that you own for quite a long time because the expenses of buying and selling (such as stamp duty, conveyancing fees, tax ) make chopping and changing too costly. With this in mind, if you plan to own the property for many years whether you buy today or in 6 months’ time isn’t as likely to make or break the performance of your investment as many people think.
If this is your first home, my suggestion would be to focus less on whether it is the right time to buy and think more about whether it’s the right time for you to buy. You want to get as clear as you can about what you are looking for and why. What area do you want to live in, do you need to stay close to work or is flexibility and working from home now an option? Are you planning on having a family and need to factor in extra space & schools, or will something smaller and low maintenance suit your lifestyle better?
If you have managed to save enough for a deposit, there’s a good chance you’re in the right financial position to make the purchase. But, you can’t be too careful or too prepared, so make sure you do your homework on how much you can afford. Spend the time making a budget and be sure to include any new expenses you might not have incurred in the past (such as electricity, water, and council rates).
However, you stated that you are struggling to find affordable homes at the moment, so you may not be in a position to purchase your dream home in your dream location at present. Many of our clients do one of three things if they are struggling to find affordable homes;
Purchase a home with Lenders Mortgage Insurance (LMI). Some clients are purchasing a home with a 5% deposit at present, with no stamp duty.
Consider mapping out your property journey. Where the first purchase will not be your dream home, by purchasing a home that will suit you now, possibly not in your ideal location, before moving when the time is right in the future.
Consider rent-vesting. Renting where you want to live & purchasing an investment property to achieve capital growth
Finally, check what you may be entitled to. Depending on the state you live in you might be eligible for first homeowner grants or stamp duty concessions which can go along way to helping you afford your new place.
Getting your foot on the property ladder is extremely tough but it’s worth it.