Getting on to the Australian property ladder – especially in the major capital cities – may appear to require superhuman strength for those who are tediously saving up for their first home deposit. However, recent developments in the Australian property market offer up the promise of new opportunities to make it a bit easier for first home buyers.
This beautiful brown land of ours was recently recognised for having two of the most expensive property markets in the world. The Australian Bureau of Statistics (ABS) also reported that in the ACT and NSW, the average first home buyer deposit is now more than $100,000.
|State||Average first home buyer deposit|
Source: ABS loans data
These unique set of challenges create somewhat of a push-pull effect for first home buyers who find that they need a bigger deposit to get into the property market, but record low interest rates mean that a home loan is now more affordable compared to when they first started to save for their deposit. The biggest hurdle is saving up for a deposit in the face of rising property prices and a shortage of suitable dwellings on the market.
This push-pull effect saw a rise in the trend of some parents offering to help their children with some or all of the deposit to buy their first home. The bank of Mum and Dad is no longer a term used to infantilise those who borrow from it, but rather to acknowledge that parents are now the 9th biggest property lender in the country. In the last quarter, 60% of home buyers who were surveyed had received help from their parents to make the purchase.
This recent break-neck surge in the property market comes as a surprise given that, the country was only just starting to recover from the economic ravages of Covid-19 at the start of this year.
A myriad of brilliant economic measures was put in place to soften the continuous blows thrown by the pandemic at our economy. The powers that be framed these key measures in a way that both assisted the recovery, and supported first home buyers trying to get onto that first rung of the property ladder. This has created new opportunities for many of us to become homeowners for the first time.
New Opportunities for First Home Buyers
Interest rates are at an all-time low right now. Historically low-interest rates have lead many of us to give serious consideration to buying Bitcoin rather than term deposits or, doing the sensible thing and ramping up our savings to secure the coveted pre-approval.
Home loan affordability – when paired with serviceability – is a welcome leg up into a property market that is again seeing a sharp increase in prices.
The federal government has swooped in – superhero style – to bridge the gap for lots of us by announcing that an additional 10,000 applicants will be able to access the extended first home loan deposit scheme until 30 June 2021. These lucky soon-to-be homeowners will score their first mortgage from participating big four lenders and non-major lenders with only a tiny 5% deposit.
This applies when they buy a newly built home and will also save them from the additional cost of the dreaded lender’s mortgage insurance (LMI).
Those first home buyers who are not interested in newly built homes can still benefit from the recent shift towards a work from home (WFH) economy. By searching outside of densely populated areas and their soaring property prices, employees who have the benefit of WFH arrangements can find charming suburban properties at price points that will reduce the size of their deposit and maximise the quality of life.
Turning First Home Buyers to New Home Owners
Although there is still a lot to be done to improve housing affordability for first home buyers, these new opportunities have the potential to turn into successful outcomes for those of us who know how to take advantage of them.
The smartest first step you can take to go from first home buyer to homeowner is to get the right team of mortgage brokers on your side. At Trilogy we will give you step-by-step guidance to get you into your first home. Even if you were turned down by other lenders in the past we can work with you to get you the right home loan at the lowest rate. Book a free 30-minute strategy session and learn how we can turn you into a homeowner sooner rather than later.