Last Updated: 10th July, 2019

Buying A Home Just Got Easier!

Published by Otto Dargan on July 8, 2019

There hasn’t been a better time for first home buyers to buy their first home since the housing values peaked in 2017.

We’ve listed the most important factors which makes it the right time for first home buyers to finally enter the property market.

Lower house prices across most major cities

The decline in house values has been a boon for first home buyers in terms of affordability.

According to Core Logic, in the combined capital cities, housing values are currently 10.1% lower than its peak which is the largest decline in values any time over the past 30 years.

As of June 2019:

  • Sydney’s median dwelling value of $776,135 is 14.9% lower than its peak.
  • Melbourne’s median dwelling value of $619,804 is 11.1% lower than its peak.
  • Brisbane’s median dwelling value of $484,882 is 2.4% lower than its peak.
  • Perth’s median dwelling value of $436,090 is 19.2% lower than its peak.
  • Adelaide’s dwelling value of $431,702 fell slightly below its peak by 0.5%.
  • Darwin’s median dwelling value of $393,298 is 29.5% lower than its peak.
  • Hobart’s median dwelling value of $445,235 which fell slightly below its peak by 1.3%.
  • Canberra’s median dwelling value of $587,583 is only down by 0.2% from its peak.

The good news is that Sydney and Melbourne showed a monthly increase in housing values by 0.07% and 0.24% in June for the first time since 2017, according to the latest CoreLogic’s Hedonic Daily Home Value Index.

This contributed to the slowest decline in national home values by 0.2 per cent month to month since March 2018 and with signs of housing prices stabilising, a trend seen since early 2019, it all points towards this being an ideal time for first home buyers.

Record low-interest rates

Home loan interest rates are already around the lowest they’ve been since the 1960s, while one year fixed rate home loans are pushing below 3 per cent and variable rate home loans hovering in the mid 3 per cent. With one lender recently announcing a 2.99% p.a. (3.59% comparison rate) 3 year fixed rate loan .

The Reserve Bank of Australia (RBA) announced yet another cash rate cut of 0.25% on July 2nd, following its rate cut in June, taking the cash rate to a historic low of 1.00%.

Relatively, fewer banks are passing on the full rate cut to their customers this time.

We publish and regularly update the best home loan interest rates on offer from our panel of almost 40 lenders so you can rest assured knowing that you’re getting the most competitive interest rate in the market today.

Increased borrowing power

Home loan borrowers will see their borrowing power improve by as much as 15 per cent because of the new changes to the assessment rate used by the banks.

Before this change, most banks used an assessment rate of 7.25% when assessing a borrowers ability to repay the home loan, now most banks are likely to assess loans at around 6.5% instead of a base rate of 7.25%.

For example, a single borrower with an annual income of $100,000 with no debts and standard living expenses will have his borrowing power increase to $713,034 from $626,670. That’s an increase of approximately 14% or $86,364 in your borrowing power when assessed at 6 per cent.

Similarly, a couple with a combined income of $100,000 (no dependents and standard living expenses) is able to borrow an additional $110,848 under the new assessment rate, increasing their borrowing power from $804,337 to $915,185.

The borrowing power calculation will be different for everyone as it’s a complex calculation but nonetheless, most borrowers will see their borrowing power increase significantly.

Special deposit guarantee from the federal government

Along with the first home owners grant (FHOG) and the stamp duty concessions/exemption for first home buyers, the government announced a new first home loan deposit scheme that enables first home buyers to get into the property market sooner because of the lower deposit requirement.

The scheme which is set to roll out on January 2020 allows first home buyers to borrow up to 95% of the property value with a 5% deposit as the government is essentially guaranteeing your home loan so you don’t pay a hefty Lenders Mortgage Insurance (LMI) fees.

You’re looking at saving tens of thousands in LMI fees with this scheme.

For example, if you were purchasing an $800,000 property in NSW with a 5% deposit, you’re looking at saving anywhere between $31,160 and 34,960 depending on the mortgage insurer.

You can try our LMI calculator to work out the LMI fees.

You don’t have to wait for the scheme to come into effect if you have a guarantor.

Other factors

Higher auction clearance rates

Auction clearance rates which are a soft indicator of housing market trends are on the rise, which points to positive property sentiment.

Research group CoreLogic recorded preliminary clearance rate of 66.4 per cent nationally while Sydney recorded the strongest preliminary auction clearance rate of 74.7% up from 49.4% recorded this time last year.

It’s a buyer’s market

The numbers of houses listed on the market remain high providing buyers with a wide range of choices and a strong negotiation position. There’s little in the way of urgency due to limited competition.

It’s a challenging seller’s market which means it’s great for first home buyers.

Boom in the number of new houses entering the market

Despite the slowdown in the numbers of new homes beginning construction, the number of completed new homes entering the market is high.

This high volume of supply is considered a key factor behind the improvement in housing affordability.

Property sentiment

According to ME’s second quarter ‘Property Sentiment Report’, more than a third of Australians are planning on purchasing a house this year and more people expect prices to rise than fall over the next 12 months.

The report also indicated that after affordability, Australians were most worried about tightening credit policies.

Our specialist mortgage brokers know which lenders have flexible credit policies and are often updated in advance on upcoming policy changes so you don’t have to worry about constantly changing credit policies.

Speak with one of our specialist mortgage brokers today by giving us a call on 1300 889 743 or by filling in our online assessment form so we can guide you through the entire home loan process.