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First Home Buyers on the Rise in 2020

Entering the property for the first time has been increasingly more difficult over the years due to increasing pricing and affordability of the property market however 2020 has presented some unique opportunities that first home buyers have been quick to take advantage of.

First Home Buyers Uprising in 2020

Before the coronavirus outbreak, the property prices in metro cities, including Sydney and Melbourne, were up 12%-14% year-over-year making it increasingly difficult each year for those wanting to enter the market. The property market in Australia, like other aspects of the economy, is expected to be impacted by the COVID-19 pandemic.

While we are yet to see significant impacts to property prices just yet, there is still a lot of movement in the property market with many choosing to sell now instead of later and first home buyers taking advantage of government benefits and incentives. Combined with low-interest rates and several government initiatives to boost up the economy, 2020 has presented a rare and favourable opportunity for those in a position to purchase their first home.


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Current Benefits to First Home Buyers

The current economic scenario presents several benefits to first home buyers:


  • First Home Owner Grant: Under the grant, eligible Australian citizens or permanent residents buying their first home, valued up to $750,000, receive a State Grant. The grant varies from state to state and stands at $20,000 for purchasing the first home in regional Victoria and $10,000 for the other regions. The purpose of the grant is to offset the GST implications and encourage homeownership among first-time buyers.


  • HomeBuilder Program: The Australian government’s HomeBuilder Program provides a grant of $25,000 to eligible homeowners, including first time homeowners, to build a new home or renovate an existing home. The program is time-limited and tax-free and aims at reviving the residential construction market during the coronavirus pandemic.


  • First Home Loan Deposit Scheme: The First Home Loan Deposit Scheme is another attempt by the government of Australia to support first home buyers in making their purchase sooner. The scheme allows first home buyers to buy their homes with a deposit of as little as 5%. NHFIC guarantees the remaining 15% of the mandatory deposit to the participating lender. Under the same scheme, the first homebuyers also save on anywhere between $10,000 and $30,000 in Lenders Mortgage Insurance (LMI) fees.


  • Low-Interest Rates: The interest rates on home mortgages have never been lower. Compared to the prior-pandemic times when the interest rates were as high as 17%, first home buyers can access capital for rates as low as 2.3%. Thus, it is much cheaper to take home loans and pay them back, as compared to renting a house in some areas.


  • Stamp Duty Exemption or Concession: The first home buyers are also eligible to receive stamp duty exemption or concession. If the dutiable value of the house is less than $600,000, the stamp duty is exempted, while the homes with a dutiable value between $600,001 and $750,000 receive a concession on stamp duty.


“I felt really overwhelmed by the idea, I watched my sister purchase a home in Sydney, during the peak of the market, and it just seemed so aggressive and scary. Invest Blue definitely took the ‘scariness’ out of the purchase of our first home.”

Read our client story “first home jitters” here.


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Positive Impact on Housing Affordability

The coronavirus pandemic may, after all, solve one of the most chronic problems of Australia. The housing affordability in Australia is positively impacted due to the low-interest rates and numerous government schemes.

The property prices are also predicted to ease, with steeper drops anticipated in the future owing to higher unemployment. The Reserve Bank of Australia (RBA) has already predicted that a 40% fall in property prices is extremely plausible in some areas. The combination of low house prices and lower cost of borrowing is supportive of new home buyers entering the property market and taking advantage of the improved housing affordability.

Of course, all this comes as a result of current homeowners who are struggling to meet their current debt demands and needing to sell, which is terribly difficult.

You can read our full market update on “three reasons why the coronavirus pandemic might fix Australia’s housing affordability crisis” here.


Long-Term Impact of Dropping Home Prices on the Economy

The continuing downturn in housing prices is making homeownership more affordable in Australia. It is an excellent short-term positive; however, the long-term implications on the economy can be highly damaging.

Government initiatives and schemes are assisting in supporting the current state of the property market and delaying a potential dip. Many banks have announced that home loan repayments can be paused for an additional four months, on top of the earlier announced six months deferral. However, the interest in these home loan payments will continue to accrue, and the loan size will ultimately grow larger.

With rising unemployment due to the pandemic, a lot of people may default on their mortgages once the loan deferral period has ended. If property prices spiral down because of people stepping out of the market or defaulting on the loan, banks could also be at risk of receiving defaulted properties that are worth less than the loan total.

With combined government incentives available of up to $45,0000 for eligible individuals paired with low-interest rates and the potential opportunity to secure a home at a reduced cost, now could be a great time for those in a position to buy to secure your first home. It is important to assess your own exposure to the same risk and carefully consider your options, the projected value of the property and your own financial security before purchasing.

You may find our article 9-tips for first home buyers useful.

A financial planner will be able to help you get your finances in order and ensure you are in the best position possible and discuss whether entering the property market is inline with your long term dreams and goals. Our inhouse lending team will also be able to help you with all your lending and financing needs.

Speak to us today to see how we can help you secure your first home.


What you need to know

This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.