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The Year of the First Home Buyer

2020 is finally behind us. And while it wasn’t the best year for most, it was not too shabby at all for first home buyers. The unexpected events of the year prompted the biggest entry-level buying spree in a decade.

Early in the year prices were rising, discouraging many to enter the market. Then wham! Coronavirus and a recession. The market paused. Then in flooded a raft of government grants and incentives for first home buyers. The result – the highest level of first home buyers rushing to enter the property market since the first home buyers grant was tripled in the GFC.

For the fortunate buyers that have kept their jobs, it brought about the opportunity to snap up their first home without investor competition. Investors were too busy struggling with tenancy, cashflow and rental issues brought about via COVID-19 to be active within the property market.

The year also started with the rollout of the First Home Loan Deposit Scheme. This scheme gave 10,000 first-home buyers the opportunity to get into the market with as little as a 5 per cent deposit, without paying lender’s mortgage insurance. One less expense. Yippee.

And it was eaten up with the first 3000 spots with major banks taken up within 10 days and the remaining 7000 spots gone by May. This enthusiasm prompted the Government to release 10,000 more places – all taken up by November.

The next little bit of help came in the form of HomeBuilder – a grant that could be accessed on top of the existing first home owner grant and stamp duty concessions and exemptions – all of a sudden first home buyers had 10s of thousands of dollars in their pockets.

There were a range of stamp duty concessions across the country. In NSW, you could avoid paying stamp duty on homes up to $800k and concessions on homes up to $1 mil. In Vic, a 50% discount was applied to stamp duty on new homes up to $1 mil with a 25% for existing homes.

All these little bonuses and discounts, combined with low interest rates, a halt in population growth and pullback in investor demand made it the perfect time for first home buyers to realise their dream.

We saw new loan commitments to owner-occupier first home buyers climbing in June, particularly in WA, SA and Tassie. By October, the figures were almost 40% higher than Jan with first-home-buyer commitments were highest in NSW, closely followed by Victoria and Queensland. Subdued prices in 2020 had given more first-home buyers the chance to get into the market.

In recent years, there was were times where prices were growing way quicker than people could save … and first home-buyers became quickly deflated. Many were of the (mis)belief that they were going to be left off the property ladder for good. Then came this past year, the year that brought something positive to the table for first home buyers. A plus for good ole 2020!

More good news – it’s not set to slow down. 2021 is still looking good for first home buyers. First home buyer confidence is likely to stay strong throughout the start of the year before dropping back a little as the year progresses into the cooler months, followed by a likely surge in Q4 (the typical annual cycle).

With investors unlikely to return to the market while vacancy rates remain higher than usual, we expect first home buyer numbers to remain high with interest strongest in outer suburbs and regional areas where new development was underway.

There are caveats to the above though. While Sydney and Melbourne are text book cases, some other capital cities have seen a recent surge in investor buyers (e.g. Perth and Canberra) and tenancies (e.g. Adelaide). The ins and outs of which are a topic for a whole new article J

In summary, if you’re a first home buyer that didn’t get in last year, start making plans. Grab those grants and discounts and get in! It’s your time.

 

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