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When is the best time to buy your first home in Australia?

Market Insights
9 months ago
4 minutes

As challenges continue to mount for first-home buyers in Australia’s property market, the importance of understanding market trends, investor impacts, and homeowner grants is more significant than ever. It’s been highlighted by experts that a combination of surging housing and rental values along with rising interest rates has made housing affordability an issue, particularly for first-time buyers.

Their research revealed that saving for a 20% deposit would now require saving for a substantial average of 9.7 years.

“While first-time home buyers encounter numerous challenges in acquiring their initial homes, it is crucial to be well-informed about the optimal timing for making this significant purchase when the opportunity arises,” says Professor Peter Swan, School of Banking and Finance at UNSW Business School.  

“Purchasing property without knowing the market could lead to first home buyers having challenges in making their mortgage repayments.”

Along with Dr Nalini Prasad, a Senior Lecturer also at UNSW Business School, they discuss the current property market and the optimal times for first-home buying.

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Professor Swan advises purchasing when house prices are depressed, provided one has the financial capacity to raise the deposit and meet interest payments. Dr Prasad contributes with the suggestion that this can be when interest rates are low and house price growth is cooling, after individuals have gathered enough savings.

When it comes to predicting housing price changes, these remain largely economy-dependent and hard to predict. “These supply constraints, combined with high immigrant numbers, make it unlikely that there will be substantial price falls in the near future,” adds Prof. Swan.

First-time buyers should also watch out for a rising market characterised by high inflation and rapidly rising interest rates. Prof. Swan notes that a recession during these times can lead to repayment difficulties for low-income home buyers.

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When asked about the choice between renting and property purchase in the current climate, both experts weigh up the pros and cons. While high inflation and rising interest rates make the market tough for first-home buyers, the current trends of increasing rents may make buying property more alluring in some cases.

Turning to the influence of investors on the market, Prof. Swan explains the mechanics of negative gearing, which adversely impacts renters and first-home buyers by pushing up property prices, yet also increases the rental housing supply. Dr Prasad adds that increased investor activity can drive up house prices, relegating homeownership beyond the reach of first-home buyers.

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Crossing over to government subsidies, Prof. Swan and Dr Prasad agree that although these initiatives aim to benefit first-home buyers, they can, in practice, lead to price inflation, offsetting their intended benefit.

“There are government initiatives that save first home buyers money on stamp duty or allow first home buyers to purchase a house with a smaller deposit,” said Dr Prasad.

“These schemes are often popular as it appears that first home buyers can save money on stamp duty or purchase a house with a smaller deposit.

“A problem with these initiatives is that if first-home buyers have more money to buy a house then it will just push up the price of housing, leaving first-home buyers no better off than without the government support initiative.”

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For those unable to afford to live in their current area, Prof. Swan suggests that renting offers more flexibility while Dr Prasad advocates for considering smaller houses or those further out from city centres.

As the Australian real estate landscape continues to evolve in the face of economic trends, first-home buyers are advised to stay informed about the changing market conditions before committing to such a significant financial decision.

For more real estate news, lifestyle, and market insights, click here.

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