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Help to Buy: A Boost for First-Home Buyers – But at What Cost?

The Help to Buy scheme has drawn attention as a potential lifeline for first-home buyers, offering a unique pathway to enter the property market. By allowing the government to co-purchase up to 40% of a new home and reducing deposit requirements, it’s no surprise that many see it as a game-changer. However, this initiative comes with some caveats worth exploring.

Will It Drive Up Prices in the Affordable Segment?

The scheme’s focus on properties with price caps could inadvertently increase demand for affordable homes. While this is a boon for eligible buyers, it raises concerns:

• Potential Price Inflation: A surge in demand could outpace supply, driving up prices in the lower end of the market.
• Challenges for Non-Scheme Buyers: Those who don’t qualify may struggle to compete in this heated segment.

The Equity Trade-Off

One critical aspect of the Help to Buy scheme is the equity split. If the government co-owns a portion of your home—say 30%—they’re entitled to that same percentage of the profits when you sell. This remains true whether property values rise or fall.

• While the scheme lowers the barriers to ownership upfront, the long-term financial implications can’t be overlooked.

A Balanced Perspective

For some, Help to Buy may be the key to homeownership sooner than expected. But for others, the increased demand could lead to higher prices and intensified competition. Moreover, the equity-sharing mechanism means buyers must carefully weigh the benefits against the long-term financial trade-offs.

This initiative, while promising, serves as a reminder that every silver lining has its cloud.

Auction Market Wrap-Up: Steady Results as November Concludes

As November came to a close, the auction market demonstrated steady performance despite a slight easing in clearance rates over recent weeks. Here’s a snapshot of the week’s key trends and insights:

National Snapshot

• Clearance Rate: This week’s clearance rate was 58.2%, a marginal increase from 58.1% last week but below last year’s 62.4%.
• Auction Volumes: Higher volumes indicate that vendors are keen to secure sales before the holiday season.

Sydney Highlights

• Clearance Rate: Climbed to 68.0% from 67.2% last week, though still trailing 2023’s 69.6%.
• Median Price: Rose to $1,895,250, up from $1,860,000 last week and an impressive 16.6% higher than the same time last year.
• Top Sale: A standout property at 10 Queens Ave, Vaucluse, fetched $26M, while the most affordable sale was a two-bedroom unit in Warwick Farm for $502,000.

Melbourne Highlights

• Clearance Rate: Edged up to 64.1%, slightly higher than last week’s 63.9%.
• Median Price: Reached $1,007,000, an increase from last week’s $963,000, though still 9.9% lower than 2023 levels.
• Top Performing Region: Melbourne’s North led with a 68.2% clearance rate, reflecting strong demand in the area.

Key Takeaways

• Steady Clearance Rates: Despite increasing auction volumes, the market has maintained steady clearance rates.
• Sydney’s Strength: The city continues to show resilience with rising prices and a strong auction performance.
• Melbourne’s Mixed Signals: While activity is up, median prices remain lower compared to last year, highlighting the varied dynamics at play.

As the holiday season approaches, the auction market shows signs of stabilising amidst growing volumes, setting the stage for an interesting close to the year.

Why Are Homes Taking Longer to Sell?

The Australian property market is experiencing a notable shift, with homes now taking longer to sell than they did a year ago. CoreLogic ’s latest data for the October quarter highlights this trend and sheds light on what’s driving it.

The Numbers: Selling Times Are Up

• Median Selling Time: Increased to 33 days compared to 27 days last year.
• Capital Cities: Most saw rising selling times, with two exceptions:Adelaide: Held steady at 26 days.Darwin: Rose slightly to 54 days.

What’s Behind the Longer Selling Times?

The extended time on the market can be attributed to key factors:

• Rising Stock Levels: More properties are available, giving buyers: Greater Choice: Buyers have a wider selection to consider. Reduced Competition: Less urgency to act quickly.
• Market Conditions Cooling: This often signals a transition to a more balanced market where buyers and sellers negotiate on more equal footing.

Key Insights

• Longer Selling Times: Reflect a decline in buyer urgency and potentially a more deliberate approach to purchasing.
• Adelaide and Darwin Stand Out: Both cities are bucking the trend, showing stability in selling times despite broader market changes.
• Opportunities for Buyers: Increased listings mean less pressure, providing room for negotiation and better deals.

Looking Ahead

The question remains: will this trend continue into 2024? While current data suggests a cooling market, it could pave the way for a balanced environment where both buyers and sellers find opportunities. For buyers, now may be the perfect time to capitalise on less competitive conditions.