First home buyers expect first rate homes

Although improving in some aspects, 2012 may be a period of ‘steady as she goes.’ REIWA is reporting that the residential property market’s activity is about 25% lower than long-term averages. Buyer’s sentiment feels slightly defensive and this is reflected in the considered approach buyers are adopting.

However, with nearly one in five new mortgages loaned to first homebuyers in January, it is clear an influential segment of the market is emerging. The balance between this group of people deciding to take up home ownership and those deciding to stay-put renting, is a significant catalyst and a contributing factor to the ups and downs of the market.

After the Government’s First Home Buyers Boosts we saw a major upswing in 2009. Albeit an artificial means of inflating prices and a distortion of the market…but certainly an influential act nonetheless.

While the activity in this sector gives some cause for wary optimism, affordability in 2012 may also see many choosing to remain in the renting game. This would consequently have a major impact on the investment market resulting in stronger rental returns for landlords. Moreover, with this high demand on the rental market, yields will be driven up and vacancies forced down; combine this with more affordable interest rates and there will be some movement in investments.

There have also been some structural shifts in societal norms which are important factors to consider when analysing market trends. One of particular note is; people are deciding to live at the family home for much longer. The average age many would become first home owners in previous years used to be around the age of 24…now many are waiting until they are at least 28. This is partly lifestyle driven and also financially driven. The emerging generation of new buyers seem to be much more inclined to wait until they can afford their ideal first home instead of just ‘making do.’ Perhaps it has also become more socially acceptable to stay with the parents longer? And before us baby boomers go to mouth the words…“back in my day…” just accept the fact that things have changed and may be for the better.

The other trend that we are noticing is that less first homebuyers are building new homes with currently seven out of ten purchasing established properties. Construction is a powerful means of stimulating the economy and it’s often a tool Governments use when the economy is dull. So this decline in new builds in the residential market will also be having a knock-on effect especially in the pricing of established homes.

This trend is likely being driven by established homes potentially offering a better value proposition and a much quicker way for first homebuyers to get into the market. Many also have a strong desire to stay relatively close to the city centre and other urban nodes plus affordable house and land packages in the inner suburbs are now basically non-existent. The rise of DIY home renovation TV shows could also have sparked the interest in buying established homes. But perhaps it just comes down to the simple fact that they are seeking something different.

As already mentioned, the current property market may not be in an ideal state, but the silver lining is we are living in an ideal State, a State that is well placed to weather the economic issues outside of Australia. So whether you are a first homebuyer, a tenant, a landlord, (or even a parent housing your 28 year old children), if you want to stay ahead of the property game, it is crucial to stay informed or use an informed agent or property manager and be flexible to market conditions. As one thing is for sure; market conditions will never stay the same.