Buying your first home: a New Year’s resolution you can stick to
Believe it or not, it's happening again already – a new year is upon us. The last 12 months have flown by with some goals and resolutions for the year hopefully fulfilled, but it's just as likely that some have fallen by the wayside.
The barriers to entry into the real estate market may be a little less imposing next year.
So now, as we ready ourselves to close the book on another annual chapter, we should be looking ahead to what we want to achieve in the new year. For some of us, that might mean assessing our living situation and beginning the journey to home ownership. If you're thinking of joining the ranks of Australian first home buyers in the coming months, it's important to know what to look out for, and what to avoid.
While much has been made of the Australian housing boom in the past several years, with median house prices swelling to record-breaking levels in our capital cities, indications now seem to be that the market is beginning to cool. Figures from CoreLogic RP Data in November 2015 showed that median prices in five Australian capital cities had fallen, while the Australian Bureau of Statistics found property investor activity dipped by 6.1 per cent in October.
What this means for you, as a prospective first home buyer, is that the barriers to entry into the real estate market may be a little less imposing next year. Perhaps now is the perfect time to speak to a buyer's agent about stepping onto the home ownership ladder.
Getting your finances in order
Saving your deposit
If you find yourself ready to start the journey of buying your first home, hopefully you will have been saving towards that goal for some time. Accruing the necessary amount of money for a deposit is the first, and often most challenging, hurdle you will face as a first home buyer.
A recent study by Bankwest found that the average time needed for a couple to save a deposit was 4.5 years in Australia's capital cities, and as long as 7.9 years in Sydney. That's a huge commitment – both in time and money – so it's important to develop an effective budget and stick to it.
Accruing the necessary amount of money for a deposit is the first, and often most challenging, hurdle you will face as a first home buyer.
For first home buyers, the good news is you might be eligible for a helping hand with your deposit. Each state and territory government in Australia has its own variant of the First Home Owners Grant scheme, with $10,000 on offer in NSW and Victoria, and $15,000 in Queensland.
There are some conditions to the scheme (your new home's price must be less than $750,000, for example) but when you're saving for a deposit you'll quickly learn that every bit counts.
Securing a home loan
Once you've saved your deposit, or at least a significant portion of it, you might want to make some preliminary inquiries about securing a mortgage. It's never too early to talk to your lender about just how much you can borrow to buy your first home – in fact, it could even inform your final budget, and where you will start your property search.
Be mindful of 'hidden' costs
As if gathering hundreds of thousands of dollars to buy your first home wasn't enough, there are significant additional expenses you need to factor in when looking at houses for sale. None of these are as potentially unpleasant as stamp duty, which can add significantly to your final spend.
However, as a first home buyer you may be eligible for some form of stamp duty concession. In NSW for example, if you are buying vacant land to build a brand new home, you will be exempt from some or all stamp duty. In Victoria, meanwhile, your stamp duty could be cut in half if the value of your home and land is less than $600,000.
As a first home buyer you may be eligible for some form of stamp duty concession.
Calculating stamp duty can be a complicated process, and while there are frequent calls from the industry to abolish the controversial levy, for now it's a necessary evil to endure. If you're unsure about stamp duty, speaking to an expert such as a buyer's agent can help prepare you for the extra cost.
Amidst all the excitement of buying your first home, it can be easy to forget about all the peripheral costs of moving house. They may not seem like huge expenses on an individual basis, but they can quickly pile up into more than you were expecting.
Everyone's circumstances will be a little different, but some common relocating expenses include:
- House movers – Hiring a company to pack and move everything from one place to another can be a costly exercise.
- Truck rental – If you think you're capable of packing up your possessions and moving them yourself, you'll likely still need a truck for larger furniture. You might save compared to using a professional moving company, but truck rental still isn't cheap.
- Storage – Some people may have a period in between vacating their old house and moving into their new one, so paying for a storage facility could add extra expense to your budget.
- Cleaning – If you're coming from a rental property, your landlord or property manager will likely require that the property is extensively cleaned and tidied before refunding your deposit. Needing to have the carpets and furniture steam-cleaned, or gardens weeded and tidied, can be the financial sting in the tail of your tenancy.
How can Cohen Handler help first home buyers?
As you can probably tell, there's a lot involved in simply preparing yourself to buy a new home, before even reaching the actual act of buying. That's where Cohen Handler's buyer's agents can come in to help, shepherding you through the property search and purchase process. First time home buyers may find themselves a little unsure of their footing, but we can help make the transition to homeowner as streamlined as possible.
Your property search
If you've never seriously looked into the residential property market before, your limited experience can put you at a disadvantage when it comes time to search for your first home. Knowing how and where to effectively search for houses for sale is crucial in finding the best opportunities, so if you're wary, why not let an expert assist you?
Knowing how and where to effectively search for houses for sale is crucial.
Your experienced and well-connected buyer's agent will work with you to settle on precisely what you want in a first home, and then set about finding it for you. Since 2009, Cohen Handler has sourced and inspected over 30,000 properties, and our network of contacts within the real estate industry allow us to regularly find new homes for sale, many of which haven't even appeared on the wider market.
While not popular in all parts of the country, in Sydney and Melbourne a large proportion of residential sales happen at auction. According to CoreLogic RP Data figures, the process was so popular in the first seven months of the year that as many as 35 per cent of all transactions in the two cities were finalised at auction. Few experiences for the first home buyer can be as intimidating as attending and bidding at a property auction, where more experienced buyers and investors can be ruthless.
At Cohen Handler, we know how important having a strong auction strategy is. Our buyer's agents can guide people through theses turbulent waters, even going as far as bidding on your behalf.
If you're working on your list of New Year's resolutions this December and find yourself dreaming of improving your living situation, maybe the time is right to get serious about buying your first home. With the help of a buyer's agent, you might be closer to that dream than you think.