Why First Home Buyers Should Be Looking To Buy Right Now

It may seem counterintuitive, but in the midst of the ongoing COVID-19 pandemic, we believe there is great opportunity for first home buyers to enter the market, albeit only if they have security surrounding their employment or existing business.

Some key factors as to why first home buyers should see the current climate as an opportunity rather than a detriment to their purchasing goals include:

Lack Of Investor Activity

  • Investors often look at the same properties as first home buyers, increasing competition in the market and driving up prices
  • First home buyers are generally more sensitive to price than investors and as such are often priced out of the market
  • The NSW Government has introduced an interim 60-day stop on landlords seeking to evict tenants due to rental arrears as a result of COVID-19, together with longer six-month restrictions on rental arrears evictions for those financially disadvantaged by COVID-19.
  • This eviction moratorium (meaning tenants might avoid paying rent until the health crisis blows over) has led to a lot of investors taking a back seat, thus decreasing competition

Low Interest Rate Environment

  • The RBA slashed the interest rate in late March 2020 to 0.25%, meaning borrowing money is cheaper and at an historic low
  • CoreLogic data suggests that more than a third of Australian properties have estimated mortgage repayments less than local weekly rents

Government Assistance For First Home Buyers Has Remained The Same

  • The First Home Owner Grant in New South Wales is still in place, with buyers still able to access the $10,000 government funded grant subject to the normal eligibility requirements
  • This year the Federal government implemented the First Home Loan Deposit Scheme, assisting eligible first-home buyers by sanctioning a deposit on a property as low as 5% – this scheme has not changed, albeit in the wake of coronavirus, the government has extended the 90-day time frame for finding a home to 180 days

Changing Methods Of Sale

  • General methods of sale are changing, and private treaties are becoming the prominent method of sale (even in some traditional auction-centric geographies)
  • Online auctions will continue, however many agencies are shifting their sale methods almost entirely to private treaty situations (e.g. Bresic Whitney)
  • There will be an increase in “off market” property opportunities / transactions as people look to save costs on what they may now see as ineffective advertising

Less Volatility At The First Home Buyer Price Point

  • The first home buyer market will remain relatively stable in nominal terms compared to the rest of the market – for example, a potential 5-10% decrease in value on a $600,000 property is far less than that of, say, a $2,000,000 property
  • With the ongoing government assistance schemes in place, specifically the First Home Loan Deposit Scheme, activity in the first home buyer market will not soften as much as the upper end, as buyers will still need to buy within the (recently extended) time frame of 180 days

When COVID-19 Subsides Prices Will May Rise To Levels Greater Than Those Pre-Pandemic

  • The last time Australia faced a major economic crisis was the GFC of 2008, during which time house prices in Australian capital cities rose 13.6% in 2009 and a further 6% in 2010
  • Although there are excellent buying opportunities now for first home buyers, many experts are predicting the market to follow a similar trend once the pandemic slows
  • CEO of hotspotting.com.au Terry Ryder explains “in times of economic upheaval and share market crashes, people head for the safety, security and solidity of bricks and mortar”
  • CoreLogic’s Head of Research Eliza Owen believes property is likely to be one of the first sectors that bounces back once pandemic restrictions are lifted, saying “once the virus is contained, property is looking increasingly better-placed for a recovery because of the high levels of monetary and fiscal stimulus available.”

Vendors Are More Willing To Listen To Offers

  • Before the COVID-19 pandemic, the property market was ‘booming’ and there were more buyers than sellers – now, we are likely to see an increase in supply levels and a decrease in demand across some sectors of the market
  • Many would-be buyers are most likely to sit on the sidelines for a while until things become clearer, meaning sellers will be more flexible to accepting offers rather than holding out for a top price
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