Should First Home Buyers ride the wave in 2021?
Wise man say only fools rush in - A saying that has stood the test of time and its meaning still holds weight today. I know Elvis was not referring to the Australian housing market's first home buyers, but if you are in the market for your first home, listen to these sage words of advice.
I am old enough to remember the GFC well, having seen similar stamp duty exemptions and govt grants spiral an already heating property market towards the stratosphere.
I watched as first home buyers in Sydney were paying 600k for properties that were really worth 500k to 520k max at that time. All driven by a call to action of an end date, like a cheesy EOFY sale. What it created was a huge surge in crappy properties being snapped up for over inflated prices.
So fast forward to 2021, has much changed? Well I see history repeating itself, the government is cooking up the same dish and using its tried and tested recipe of stamp duty exemptions, cash grants and the cherry on top? A limited number of govt backed guarantees for 5% of the deposit, Guess what ? The call to action this time is there is only a limited supply of these allotments up for grabs to drive demand.
As Finance brokers, we are seeing builders getting rid of bad stock at over inflated prices and unfortunately the misinformed, first home buyers are the ones snapping them up.
When our clients ask us what we think about these schemes, this is what we are telling our clients to do:
1. Due your due diligence on the builder:
- How long have they operated for?
- What are some of their past projects? Go speak to the head of the body corporate of these older developments and find out what the builder is like to deal with post settlement? Is he easy to deal with? When there are issues to be rectified did he fix them?.
2. Do your research on the area:
- Ask your broker to run an RP Data search on your suburb in question.
- What has the growth projection been like for the past 5 years. Good? awesome!. Bad? You need to find out why. If they won't do it, get in touch with us and our team will happily run those reports for you.
3. Is it a high density or unappealing suburb according to your lender's taste? Get your broker to run a check with your proposed lender on the postcode. Last thing you want to do, is find out that your lender doesn't want to touch new stock from a particular area because they have a lot of clients already there and don't have an appetite for further risk OR they want a lower LVR and a larger deposit because of where you are buying (we have seen this happen of late).
4. Speak to your local real estate: Make sure you are not over paying. We had a recent example where we ran some RP Data reports on a suburb on behalf of a client and showed them some recent sales. We could clearly see that our client's developer was charging 80k more than any comparable recent sales in the same area for no apparent reason, our client asked the developer why and when he did not get a straight answer he pulled out of the purchase.
Treat this purchase with the respect it deserves, give it the time and research it requires and I am sure you will make the right decision which will hopefully put you and your loved ones on the path towards a happy experience/property ownership.