You’re better to do what you can, rather than worrying about what you can’t, writes Mark Bouris.
The Reserve Bank’s decision to hold steady with interest rates this week means house prices in Sydney and Melbourne are likely to keep rising, even if the growth isn’t as steep as last year’s. This is good for home owners with mortgages – but not so great for first home buyers.
There’s been a lot of negativity lately about first home buyers getting into the market. However, if you’re a first-home buyer, I suggest you focus on the parts of property-ownership you can control. You can’t control the Reserve Bank or the momentum of the property market. But you can control your deposit, your mortgage and finding a property in your price range.
First-home buyers must be practical if they’re trying to enter the market with just a deposit and without the advantage of using equity in their current home.
They could also have a chat with a mortgage broker. Expert advice is always helpful in these matters.
Currently in the mortgage market the lowest rates are about 1 per cent less than the middle of the pack. On a $400,000 home loan over 25 years, the difference between a mortgage at 5.5 per cent and 4.5 per cent is about $230 a month. This is a simple way to improve affordability.
One of the biggest mistakes first home buyers can make it to feel pressured to “keep up with the Joneses” and only buy in a prestigious suburb. But just because your ideal suburb is beyond your resources, you needn’t give up on the property market.
But where do you buy? The Sydney property market rose 3 per cent in March, and almost 14 per cent over the year. The median Sydney price is now $690,000; the Melbourne property market rose 5.6 per cent over the year to March and its median price is $518,000.
Let’s put these figures in perspective: it takes many hundreds of property sales to come up with the averages and there are many low-price sales to even out the high ones.
Some suburbs in Sydney and Melbourne are not booming. In Sydney there are properties at half the median price in outer areas such as Blacktown, Campbelltown and Wyong. And while Sydney and Melbourne surge, Brisbane, Adelaide and Canberra recorded modest gains in the year to March and Perth, Hobart and Darwin went backwards.
Many first home buyers are pragmatic about this market: they purchase a property where they can afford it. They either move there, or they rent it out and live in their suburb of choice.
In the latest home ownership figures, almost 10 per cent of property purchases were by “first-home buyers” who are not owner-occupiers. They act according to their means and once in the property market, their options increase.
So, this is not a time to give up on owning property. Be clear about your finances and talk to an expert about your options. And then do what you can rather than worrying about what you can’t.