What’s up with the increasing demand in first home purchases?
Posted by Tristan Angelini on 05 November 2021
Everything has become increasingly uncertain during the past several months due to so many factors, mainly the impact of the pandemic on our society and the economy. But it looks like there’s no stopping first-time homebuyers to get their hands on that huge investment no matter what – which is an overall good thing if you think about it.
Recent reports have revealed that property prices have soared to new heights this year that it’s actually at a decade high, which made it difficult for a lot of buyers and found the prices unaffordable. Homeownership, especially in Australia is such a big deal that it also has become the primary experience of inequality in the country. Getting into the property market has become even more of a struggle – so much so that young workers even had to put aside their desire to buy because of it. Surprisingly, recent data suggests that since January, there is an increase in demand from first home buyers than any other year since 2009, which is in a way, an irony.
So, what is up with that? Why is it happening despite the fact that it’s rather difficult to achieve homeownership these days?
During the pandemic, the government had provided stimulus packages in order to support businesses and workers who have been affected. Experts have attributed the increase in demand to the different stimulus packages plus first-homebuyer payment schemes. These allowed potential buyers who have been thinking of buying their very first home or those who have planned to buy in the next few years to purchase much sooner than intended. The first-time homebuyers are seemingly the target of these measures to help the economy recover faster. So many took advantage of the tripled First Home Owner Grant, including the HomeBuilder Grant for new builds and the Federal First Home Loan Deposit Scheme. The latter allowed low deposit schemes and increased state stamp duty concessions applicable to both new and already existing homes.
The Bank of Mum and Dad
Getting financial support from parents became such a huge thing for children who have been wanting to purchase their own home especially last year. Parents are using their own housing assets to help their offspring as leverage and this strategy is considered to be the ninth-largest home lender in Australia.
The royal commission into banking imposed stricter rules on home lending which made the strategy not as easy as it was. Experts are now saying that whether one gets approved or not for that first home depends heavily on very specific factors and requirements set by the bank of your choice.
In Melbourne alone, property prices have soared to 16 percent. While first home purchases have been in demand, potential buyers are now facing strong competition against entry-level investors which is increasingly becoming a huge factor why it’s challenging to secure a property. The grants definitely brought in demand, but it is also worth noting that the schemes are not exactly big. The growth in prices over the past year made it hard to accumulate deposits especially for those who are close to buying. The repayments are another thing to think about.
While this all seems like a good thing, experts are predicting that homeownership is going to be difficult to achieve, and entering the property market will be more challenging so an uncertain outlook in the coming months can be expected.
Also read: property prices soar