Why 2020 Will See the Rise of First Home Buyers

With interest rates hitting a historic low, prices remaining 10 per cent below the 2017 peak, APRA softening the serviceability requirements, and the opportunity to benefit from the First Home Loan Deposit Scheme, 2020 appears like the year to make the switch from renting to owning.

All these factors contribute to making buying a serious option for tenants willing to save their money by investing it in a first home. Indeed, over the fourth quarter of 2019, thanks to low-interest rates and low levels of rental growth, paying a mortgage has now become comparable to the cost of renting a property. Therefore, first home buyer activity should continue to gather momentum in 2020.

An opportunity for first home owners to buy at a more affordable level

Moreover, to encourage borrowing, APRA released some pressure on applicants and amended its guidance on residential mortgage lending. Up until June 2019, because the market had been running hot for a few years, borrowers were assessed on their capacity to service a mortgage with an interest rate of 7.25 per cent.

This has since changed to a rate of 2.5 points above the quoted interest rate (e.g., 6.5 per cent if the interest rate is 4 per cent), making borrowing accessible to more potential first home buyers, but also allowing applicants to borrow more.

Add to this interest rates reaching a record-low that should fuel demand from all buyers’ types, prices still 10 per cent below the 2017 peak, but also the option for 10,000 buyers on low or middle incomes to benefit from the First Home Loan Deposit Scheme, and 2020 appears like the year to make a move. Despite prices beginning to rise, all these elements provide opportunities to buy at a more affordable level. Furthermore, some states also offer first-time buyer grants and stamp duty exemptions.

How buying a first home can save you money

Let’s look at the figures. At a national level, considering the median house value and house rent, first home buyers able to get a 20 per cent deposit would save an average of $3 per week with a 30-year loan term offering a 3.20 per cent interest rate. With a 10 per cent deposit and the same mortgage terms, they would only pay an extra $51 per week or $2,652 per year.

Not surprisingly, these figures vary from one region to another, and some capital cities offer more opportunities than others. For example, with a 20 per cent deposit and the same contract, first home buyers would save money weekly in Darwin ($119), Hobart ($87), Canberra ($30), Adelaide ($26) and Brisbane ($24). In Darwin and Hobart, even a 10 per cent deposit would suffice to save money on housing costs, respectively $73 and $38 per week.

In Perth, however, where prices started falling after the end of the mining boom, first-time home owners would still need to spend an extra $54 per week to trade-off rental payments for mortgage repayments. Similarly, in Sydney and Melbourne, where the median house values are high, making the switch from renting to owning would respectively cost an extra $127 and $142 per week, or $6,604 and $7,384 per year.

All indicators are green to buy a first home in 2020

No matter the area, and even if prices should continue to rise, all indicators are green to make the leap in 2020, with affordability still quite good compared to where it was. Renters willing to buy their first home will have everything to gain by taking action in the coming year, starting with a decrease in their housing costs.

But what if, despite all these favourable signals, they can’t afford to buy where they live?

Then two alternatives have seemed to take shape in the past year: either move to a nearby, more affordable suburb or make a bigger move and relocate to a regional area, where opportunities to enjoy a similar lifestyle come at a much more affordable cost.

How to Buy a Home as a Couple?

Are you ready to take the next step in your relationship and buy your first home as a couple? If such a project appears very exciting on paper, it generally also comes with its share of hoops and hurdles. No matter the intensity and depth of the love you share, reality can be slightly less glamorous than what you might have expected.

Indeed, when buying a home with a partner, it isn’t all rainbows and unicorns. You will need to prepare yourselves for a few complicated, heated conversations, and be ready to compromise. You will also need to anticipate the worst that could happen (like unexpected job loss or a change in your financial situation). In other words, to successfully buy a home as a couple, the key is to communicate and anticipate.

Set a budget (and get pre-approved for a loan)

Before you even discuss what your dream house might look like, you need to figure out what you can afford. How much deposit have you saved? How much can you borrow from the bank and under what conditions? Can you benefit from grants like the first home loan deposit scheme?

When doing the maths and writing your figures down, try to be realistic or even conservative. The aim is to come up with a budget that will allow you to enjoy the same lifestyle, but without putting too much mortgage pressure on your shoulders, and on your relationship. A general rule is to make sure that repayments won’t exceed 28-30% of your take-home pay.

Know (and agree on) what you want

Now that you have a set budget and, therefore, a better idea of what you can afford, the fun part can begin. But before you start hunting for the house of your dreams, you will need to know and agree on what exactly you are looking for. Couples often believe they are on the same page but then realise once they start the visits that this is far from being the case.

House hunt with a plan

House hunting can be as exciting as it can be depressing. Competition can be harsh, making finding and securing your dream home a real challenge. So be ready to embark on an emotional roller-coaster.

But that’s not it. More than likely, it will take you a few tries before you find a home for which you might think about making an offer. For this reason, house hunting can also become very time-consuming. This is why you need to have a precise plan and stick to it. We buy houses in Peachtree Corners

When doing your research, set up alerts on real estate apps and websites, and register your interest with your local LJ Hooker real estate agent to be notified when something meeting your criteria comes up on the market. You will save some precious time and energy by narrowing down your selection as much as you can. Focus on homes that meet all your must-haves and pay attention to your deal-breakers, no matter how great the place might seem otherwise.

Make the right offer to secure your dream home

You finally found your dream home and feel ready to take the plunge and make an offer. Most likely, you will either buy by private treaty sale or at auction. But how do you give yourselves the best chance to secure your new love nest?

If you’re buying by private treaty, coming up with an offer can sometimes be tricky. You will need to figure out if the price asked for the property seems fair, and agree on how much you are willing to offer. Depending on the competition, on the information you managed to gather about the seller, and on how much you want this home, you might want to try to seal the deal and make your best offer straight away. This will limit the risk of losing the property to another buyer.

Protect your future (and prepare for the worst)

Sometimes, couples grow apart and split up. But that’s not it. Even if it’s not as fun as discussing how you will arrange and decorate your new home, you need to think about protecting your asset. Think about how things should work if you become (temporarily) unable to pay your mortgage back: separation, redundancy, loss of job, illness or even death. For all these reasons, it is crucial for unmarried couples to address any potential hiccups they could face down the track. That means not only getting all the right insurances, but also putting everything in writing in a co-purchase agreement in case of a breakup.