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Victorian first home buyers are borrowing more than ever before to break into the city’s property market.

First home buyers took out an average loan of $335,000 in April, up by $15,900 from March, and now make up 11.3 per cent of the market, according to the Australian Bureau of Statistics.

Interest rates may be at a record low, but experts say the real hurdle for first-timers remains finding the deposit.

With prices rising faster than savings, they are staying longer in the queue while others are forced to revise their criteria and look further afield.

Earlier this week, Treasurer Joe Hockey sparked outrage by advising first home buyers to get well-paying jobs in order to get a foot on the property ladder.

But according to Domain Group senior economist Andrew Wilson, this could be difficult as unemployment in Victoria is tracking at around a 12-year high. Dr Wilson believes this could have a greater impact on job seekers at an earlier stage of their career, such as first home buyers.

“It’s all right to say yeah, get an income, that’s all you need, but work’s short and there are problems with higher unemployment,” he said. “[Many first home buyers] have to pay HECS and they’ve got to pay rent.”

Based on the average loan size of a 20 per cent deposit and industry experts’ observations, it appears that first-timers are typically shopping for properties in the $400,000 to $500,000 bracket.

Armed with this budget, Domain found a three-bedroom house in Beevers Street in Footscray that is going to auction for more than $470,000.

Other options include a top-floor, two-bedroom unit in Hotham Street, St Kilda East, priced between $440,000 and $490,000 and a three-bedroom house and land package in Point Cook’s Parliament Street for $472,306.

Mortgage Choice spokeswoman Jessica Darnbrough said it was important to remember that there were other costs associated with buying a home.

“Borrowers need to take into consideration other costs including stamp duty, solicitors fees, valuation fees, loan application fees, moving costs et cetera,” she said.

“As a general rule of thumb, most lenders require customers to provide their actual living expenses for all home loan applications. This is known as a Customer Stated Living Expense (CSLE), and this figure should be the amount of money needed to maintain a reasonable standard of living and could include, for example, expenses such as food, utilities, transport, clothing, education and healthcare.

“From there, a lot of lenders will compare the Annual Living Expense Allowance with the CSLE figure provided and use the higher amount to calculate serviceability.”

Daniella Viljevac, 22, and her boyfriend Toby Smithers, 26, are looking to buy their first home in the bayside area.

Miss Viljevac, who is studying a bachelor of arts at Deakin University, and working three jobs in accounting and retail, said their parents would also assist them with the deposit.

The couple have a budget of about $550,000 and ideally want a renovator’s delight between Cheltenham and Mordialloc. But the couple are increasingly being pushed further south.

“We just want something that’s in a good location so we don’t have to move later on,” said Miss Viljevac, “we can just stay there and build another house when we have the money.”

“We want something that we can live in for now.”

It’s a familiar story for many who are being pushed out to suburbs such as Ferntree Gully, Sunshine and Croydon, according to LJ Hooker’s Victoria state manager, George Sattout.

“We’re seeing a lot of first home buyers are now unable to afford anything – certainly not houses – within the inner and surrounding areas of the city,” he said.

“They’ve been pushed out to either consider [house and land packages] in more development-type areas or maybe smaller inner-city apartment-type dwellings.”

Despite the incentive for first-timers to buy new, Greville Pabst of WBP Property Group said in many cases, established properties would perform better in the short-to-medium term as a new property depreciated over the first few years of its life.


Posted by Christine Zhou – The Age on 13th June, 2015