First-home buyers activity is about to take off as the government's expanded guarantee scheme comes into effect next month. But they've got their work cut out for them to stay ahead of the competition.
Investors are returning to the property market following a 2023 exodus, but industry professionals say there's an even bigger player taking on first-home buyers.
“I think the Bank of Mum and Dad is a bigger factor than investors,” said buyer's agent Kate Vines from Melbourne Property Advisory.
She says this cohort is also a form of investor – one that is highly engaged because they want their children to get into the market.
So, what can first home buyers do to improve their chances of success?
Ms Vines describes it as a “numbers game”. Finding a great home requires hard work, patience and a willingness to educate yourself.
"Keep a spreadsheet of results - what properties were quoted for and what they went for,” she explained. This helps buyers to spot listings that have exceeded market expectations or been underquoted.
Auction clearance rates are hovering at a two year high as lower interest rates push up competition. Picture: Sam Ruttyn
“If it seems too good to be true, it probably is. Yes, underquoting is a grubby practice but first-home buyers need to wise up too. If something seems like really good value for the quoted price, safe to assume it'll probably go over.”
Where first-home buyers are up against it
REA Group executive manager of economics Angus Moore says Victoria is among the best states for first-home buyers to be looking right now.
"In part, this is down to the fact that affordability hasn't deteriorated as badly in Victoria compared to other parts of the country.”
Investor lending is at a multi-decade high in states like Queensland, SA and WA. Picture: Getty
However, investors are a real threat to first-home buyers in other states, with a high share of activity in Queensland, South Australia and Western Australia.
“The share of new loans going to investors is sitting around the highest levels we've seen in a couple of decades. And in NSW, the share is at its highest level since 2017,” Mr Moore said.
“With interest rates having risen rapidly, and borrowing capacities commensurately fallen, first-home buyers are facing the worst affordability we've seen in at least three decades,” he added.
Should you go after properties that investors don’t want?
Ms Vines, who presently focuses her attention on the inner northern suburbs of Melbourne, which is strong first-home buyer territory, says “anecdotally, people feel like they’re losing out to an investor.”
But she warns against seeking out properties with reduced investor interest, as this can signal a home is “compromised” in some way.
Homes with reduced investor interest could signal a home is "compromised" in some way, like sitting on a busy highway which can lower the value. Picture: Getty
This might mean buying on a main road or choosing a property with an easement (that investors and developers won’t want).
“The first home buyer needs to be mindful that if they buy it cheaply now because of certain compromises, they need to expect to sell it cheaper too, relative to the market at the time.”
Ultimately, she still encourages her first-home buyers to secure the best possible asset for their future.
One first-home buyer couple Ms Vines recently helped secure a home for was Amy, 37, and her husband Michael, 35.
“We knew that because of the competitive nature of the areas we were looking to buy in – Melbourne's inner north – that it would be advantageous to use an advocate,” Amy told realestate.com.au.
In Amy and Michael’s case, having an advocate meant that they had an experienced professional watching the market with them. The house they purchased was one Ms Vines spotted.
“My husband and I had both scrolled past it while looking online as the photos weren’t great and it hadn’t caught our eye,” Amy recalled.
Once interested, though, they moved fast. Ms Vines organised a building inspection, conveyancing and a review of council plans. Amy and Michael saw it twice within a week and Ms Vines bought it on their behalf at auction.
Today, Amy and Michael are settling into their two-bedroom Victorian terrace in Fitzroy North. It sits on a 180sqm block and they will live in it in until they are ready to refurbish the cottage and rebuild the rear of the home so they can enjoy it for many years to come.
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