Sydney has long been a notoriously tough market for young first home buyers, particularly those looking to purchase in the desirable Eastern Suburbs.
However, while current market conditions present new challenges, they also offer some great opportunities for Millennials wishing to get into the market.
Changing market conditions
A number of factors will affect Sydney Eastern Suburbs real estate in 2019, but there’s no question that the market has levelled off from its peaks of recent years. Tightened lending conditions following the financial services Royal Commission have been a major factor, with buyers having less money to spend, which naturally has had a flow-on effect on prices.
The good news for Millennials ready to buy is that – with prices steady and the heat taken out of the market – this could be the perfect time to snap up a relative bargain and secure that dream property that previously may have seemed out of reach.
Sacrifice to save
ING’s 2018 Millennial Homeownership Report found the overwhelming majority of young Australians aged 22-37 are serious about home ownership, with 76 per cent making sacrifices to afford a home. A third is curbing big luxuries like holidays and one in 10 are even delaying significant life events like a wedding, honeymoon or having children, in order to get on the property ladder. More than half of Millennials said they are cutting back on little luxuries – perhaps that notorious avocado on toast? – in order to save their deposit.
If you’re putting together your first home deposit, the best starting point is to really analyse your budget to see where you can cut back in order to grow your savings faster. Tighter lending conditions also mean that the more “genuine savings” you can show lenders – that is, money saved yourself over time, not gifted to you or otherwise acquired suddenly – the better your chances of approval.
Consider where you can compromise
Many people find that some trade-off is required in order to purchase their first property. For example, choosing location and lifestyle over space. Apartment living is on the rise in Sydney’s Eastern Suburbs, as it’s often a more affordable way to get into the market.
Our advice is to focus on finding that ‘six out of 10 property‘ earlier in your property search, rather than waiting longer to find one that ticks all your boxes. Decide what your absolute non-negotiables are; however, we advise against compromising when it comes to factors you can’t change, such as a property’s location or its outlook. Remember that these factors will be your strongest selling points when it comes time to move up the property ladder.
Location, location, location
Demand for property in the Eastern Suburbs remains stronger than in most other parts of the city, which we believe will protect our area from falls in market values. According to data from domain.com.au, Paddington, Randwick, Surry Hills, Rose Bay, Coogee and Bondi are six of the top 10 most searched suburbs to buy.
If you can’t afford to buy in your absolute dream location, you might want to consider an area that has similar benefits but at a lower cost. For example, if Paddington and Bondi are out of reach, consider suburbs nearby that you may have overlooked, such as Randwick, Kensington, Kingsford or Dover Heights.
If saving a deposit on your own is out of reach, try thinking outside the box. Could you team up with a family member or close friend to buy?
Another popular alternative is ‘rentvesting’, in which would-be first home buyers choose to rent where they want to live while purchasing a more affordable property elsewhere as an investment. So long as you make sure that the rent on your investment property will cover your mortgage repayments and other maintenance costs, it can be a great way to get a foothold in the market. What’s more, it allows you to ‘try before you buy’ in the suburb you ultimately want to buy in once you’ve built up enough savings and equity via your investment.
Do your homework
Research sold price trends in your target neighbourhood and start attending auctions so that you can get comfortable with how the process works. Begin talking to real estate agents, mortgage brokers, building inspectors and friends and family who are knowledgeable about real estate in order to build your knowledge, as well as expert advice you can rely on when you’re ready to buy.