First-home buyers ready to break into the property market
First-home buyers are optimistic about cracking into the property market now but not without asking for help from the bank of mum and dad.
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Optimistic first-home buyers are rushing back into the market, with loan approvals soaring compared to a year ago.
And a new government incentive is expected to increase the numbers diving in.
Exclusive analysis for News Corp Australia by research firm Digital Finance Analytics (DFA) found more than 70 per cent of loan applications by people trying to break into the property market were successful in July, up from less than 58 per cent a year earlier.
Meanwhile the new Genworth First Home Buyer Sentiment Report shows 75 per cent of prospective entry-level buyers think this is the moment to strike, with rock-bottom mortgage interest rates, recent property price falls and economic uncertainty meaning those with savings are in the box seat to buy.
The survey of 2000 prospective and 1000 recent home buyers, revealed that of those looking to leap in 75 per cent plan to use the Federal Government’s first home loan deposit scheme while 27 per cent plan to ask parents or family for a financial helping hand.
Home Loan Experts’ managing director Otto Dargan said he expected the new scheme, which goes live in January, to result in a “rush of buyers” — but they should be mindful it could result in delays.
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“A lot of our customers are asking about the first home loan deposit Scheme and are choosing to wait if they are likely to be eligible,” he said.
Interestingly, with more first-time buyers looking at investment properties, the research found one in three said they plan to sell within just five years.
Genworth Australia’s chief executive officer Georgette Nicholas said low unemployment and low interest rates allowed first home buyers to access credit including mortgages.
“Now there’s some levelling off of home prices and interest rates look like they are going to be low for a longer period first home buyers have seen an opportunity to potentially get into the market,” she said.
“It’s a good time for them to be considering what their options are.”
The DFA data on growing loan application success rates also shows that among those who miss out, a lack of expense history is the main reason one-third of the time — a share that has quadrupled in the past 12 months.
Tori Nutbean, 29, recently purchased her first home in Melbourne’s beachside suburb of Elwood — a 1930s one bedroom apartmentfor $565,000.
“I plan to stay there for a couple of years at least and then depending on how things changes who knows,” she said.
“It’s definitely getting me out of paying rent, that was a big motivator now that mortgage repayments and interest rates arelow.”
Ms Nutbean said she was saving about $800 a fortnight, on top of affording her rental payments before she made the purchase.
The Genworth report showed of recent first-home buyers — those who purchased in the past 24 months — seven in 10 did not fund their entire deposit from savings; and of these, 57 per cent relied on some form of parental of family handout.
Financial adviser Scott Haywood said this was definitely an option for first-home buyers who often had parents who had experienced significant property price growth.
“With the expensive Australian property market I think it’s a conversation that has to be had,” he said.
“To try and get a head start the conversation has to be made, it’s OK to ask for support.”
“However if the bank of mum and dad do give one child money they have to make sure it’s fair, they may need to change their will and have a written agreement in place.”
The Reserve Bank of Australia’s governor Philip Lowe also made two consecutive cash rate cuts in June and July, pushing the cash rate to a record low of 1 per cent.
Some mortgage interest rate deals are now lower than three per cent.
Originally published as First-home buyers ready to break into the property market