2013 has been a tough year for first home buyers with investors dominating the market and housing affordability out of reach for some, but will 2014 be a different story?
According to the LJ Hooker’s ‘First Home Buyers: a dynamic and changing market’ white paper, first home buyers are predicted to make a strong return with the number of first home buyers entering the property market to increase to about 9,167 a month in 2014 (110,000 for the year). This is a significant increase compared to the 7,977 first home buyers in July 2013.
The record low interest rates and housing affordability are said to be the reasons why 2014 will see a surge of first home buyers. In the June 2013 quarter, housing affordability reached one of its best levels in the past decade with capital cities improving by 4.5%. This report also states that this new wave of potential buyers is due to the birth rate increase in the 1980s.
So, if you want to make 2014 the year you begin your planning to purchase your first home in earnest, then it’s time to get organised.
According to the Genworth Homebuyer Confidence Index (Sept 2013), prospective first home buyers reported the difficulty of saving for a deposit as one of the biggest barriers to home ownership.
Saving your deposit will be the biggest main focus and the more you can save, the less you will have to pay on other fees. Your deposit can be as little as 5% of the purchase price plus purchase costs like stamp duty and solicitor’s fees but you will incur Lenders Mortgage Insurance, which will cost thousands of dollars. The only reprieve is that it is usually added to the loan. The more you save beyond 5% will incrementally reduce the mortgage insurance cost so holding off for a few months to allow for extra saving could reap rewards by reducing mortgage insurance. A deposit of 20% of the purchase price should mean that there is no mortgage insurance so if you are really determined to avoid it then now is the time to get serious. Take a look at our blog ‘ Why you should save for a large deposit’ for more information.
So, take the time now to create a savings plan for your deposit and other pre-purchase costs so you know what you are aiming for.
2014 could be the year first home buyers make a comeback, but if you are serious about taking that next step, then you should start planning now.