Could now be the time to take the plunge and buy your first property?

Or are you better off to keep renting? We break down what to consider if you’re thinking it may be time to purchase your first property in Sydney’s eastern suburbs.

No doubt you’ve seen the media headlines saying that it’s cheaper to buy than to rent in Australia’s property market. Delve a little deeper into the data and you’ll find that according to Domain Group there are no suburbs in Sydney where this is true for homes and for units it’s only true of one Sydney suburb: Lakemba. But we’d argue that it’s still a great time for first time buyers to take the plunge.

While buying in Sydney’s highly desirable blue-chip eastern suburbs is never going to be a budget option for first home buyers, there are a number of reasons why now may be the ideal time to buy your first home. With softer market conditions and low interest rates, it’s never been more affordable to service a home loan, and you stand to make a strong capital gain over the long term.

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Current market conditions favour first home buyers

The days of turning up to open homes and finding 50 competitors crowding the place out are over – for now. The first three quarters of the last financial year saw Sydney’s property market prices continue to soften from their peak in 2017. However, we’re already beginning to see signs of market recovery, with prices stabilising over the past quarter.

The good news for first time home buyers is that with less competition in the market currently, and properties taking longer to sell, right now you can still take your time finding the perfect first home and negotiating your price.

Record low interest rates

After keeping rates on hold for nearly three years, in June the Reserve Bank of Australia (RBA) cut interest rates, taking them to an all-time low. At least one additional rate cut is anticipated before the end of this year.

How much is my property worth

Lending restrictions loosen

As a result of the Banking Royal Commission, banks tightened their lending requirements, making it tough for first time buyers. However, the Australian Prudential Regulation Authority (APRA) has recently lowered the minimum interest rate buffer required on a loan from 7.5% to 2.5% above the current interest rate, which should make borrowing more affordable and increase many buyers’ borrowing capacity.

Help for first home buyers

A variety of state and federal government measures aim to make it easier for first time home buyers to purchase a property. Under the First Home Buyer’s Assistance Scheme (FHBAS), you may be entitled to a concessional rate on transfer duty or even an exemption from paying it altogether. If you’re a first home buyer, you may also qualify for a $10,000 grant under the First Home Owner Grant (New Homes) scheme. The Federal Government’s First Home Super Saver Scheme now allows first time home buyers to save their home deposit through their superannuation.

Your deposit and finances

With the current historically low interest rates, servicing your first home loan is likely to be less of an issue than saving your 20 per cent deposit. If you are looking at a purchase of around one million dollars, you will need to have $200,000 saved. If your deposit is less than 20 per cent, you will have to pay Lender’s Mortgage Insurance (LMI). This protects the bank if you default on your loan and can be expensive.

Keep renting?

The upside to continuing to rent is that continued oversupply of apartments has pushed up rental vacancy rates across the city. According to the February 2019 Real Estate Institute of NSW (REINSW) Vacancy Rate Survey, vacancy rates in the eastern suburbs, lower north shore and inner west were at 3.2% as of February this year, up from 1.8 per cent 12 months earlier. However, the longer you rent, the longer you delay getting that first foot on the property ladder and building equity in your own home.

Want more?

If you’re looking to buy or sell property in Sydney’s eastern suburbs get in touch with my team today.

Sydney’s Eastern Suburbs Market Snapshot

A detailed annual assessment of the property market focusing on the Eastern Suburbs of Sydney, Australia.

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