First Time Buyers, Be Ready to Compromise!

Compromising on your first home can pay off in the long run
Photo: The Homepage

Industry experts have urged first time buyers to be ready to compromise in order to get into the real estate market.

Accepting a property in a less than perfect location, size or condition could help first home owners secure something more affordable. 

Although it might not be the dream home one imagined, it acts as a stepping stone to eventually being able to buy the ideal property in a preferred location.

First Time Home Buyer Help Reduced Amid Claims of Unaffordable Housing

It is no secret that this segment of buyers is finding it hard to break into the property market due to rising prices.

The House Price Report compiled by Australian Property Monitors shows that in 2013, Melbourne house prices grew by 8.6 per cent, while unit prices grew by 6.8 per cent. 

“Don’t be afraid… of making a reasonable compromise.”

This period also saw an increase in investor activity, as well as the cessation of government grants for first home buyers in relation to established properties in Victoria.

According to Robert Larocca of RP Data, the end of the $7,000 grant no doubt contributed to the large fall in the number of first time buyer loans given in the state.     

Slower Price Growth in 2014 Could Help First Time Buyer Figures

A good starting point to revive this segment of the Melbourne market is smaller price increases.

Fitch, a major global ratings agency, forecasted a more measured growth of 4 per cent for Australian house prices this year.

Moderate price increase, low interest rate and the stamp duty cut from 40 per cent to 50 per cent may provide some incentive to enter the housing market.

First Time Home Buying is About Give and Take

Another key, it seems, is to compromise.

In a recent video program called First Home Buyers: Forecast 2014, industry experts spoke out about the concessions some first time buyers are making to get onto the property ladder. These include:

• Buying apartments instead of houses
• Opting for smaller properties
• Renting in a desired location while buying an investment property elsewhere
• Purchasing as a group
• Having parents fund the initial deposit.

Monique Sasson, the founder of Wakelin Property Advisory, also emphasised the need to accept a less than perfect location for a first home.

“It is no secret that this segment of buyers is finding it hard to break into the property market due to rising prices.”

“Don’t be afraid as a first home buyer of making a reasonable compromise. All you have to do is understand that it is a compromise, and that is just how it is for the time being; and the more you reduce your debt, the closer you are going to be able to get to moving a little bit closer to where you would ideally like to be,” she said.

In terms of areas to watch out for, North Melbourne, Kensington, Flemington, Brunswick, West Brunswick, East Brunswick, Docklands, the CBD, Southbank, Cheltenham, Bonbeach, Aspendale, Werribee and Cranbourne were all mentioned in the program.