First home buyers: one-third of Australian first timers can’t afford their homes

Many successful first-home buyers are setting themselves up for years of financial pain, according to an alarming new report.

Too many first home buyers are overspending.

First home buyers across Australia are breaking the bank and spending far more money than they can afford to secure themselves a new home.

Research from Finder’s First Home Buyers Report indicates that the housing affordability crisis has pushed more than a third of first home buyers beyond their budget.

Up to eight per cent of recent first home buyers paid more than $100,000 over their budget, and a further eight per cent paid between $50,000 and $100,000 over budget.

One in eight home buyers are looking to purchase a home in a different state, as many are priced out of their own state. Photo: Nick Clayton

This pressure on buyers wishing to enter the market has led to one in eight home buyers looking to purchase a home in a different state, with around 25 per cent searching for a property in a different region of their own state.

According to Finder’s senior editor of money Sarah Megginson, high property prices are to blame for busting buyers’ budgets.

“We’re in a market where prices have risen 20-30 per cent over the past year, and wages just can’t keep up with that level of growth,” Ms Megginson said.

MORE: Old school transformed into lush waterfront retreat

Historic doctor’s house ‘The Mansion’ sells for $2.15m

Energy crisis drives change in Aussie homes

“Many are being forced to spend more than they had initially hoped, but this will have consequences down the track on buyers’ ability to service their loans.”

Ms Megginson believed buyers may have more luck finding a home within their budget if they expanded their location filters or looked for an apartment or unit instead of a house.

The research found that 41 per cent of buyers from NSW and 40 per cent from QLD blew out their budgets, compared to 31 per cent of Victorian buyers.

House prices have risen by an average of 19 per cent across the eight capital cities in the past year, with units rising by 12 per cent. Pic Katrina Tepper. NSW / Industry / Housing / Real Estate

Finder’s home loan expert Richard Whitten says house prices have risen by an average of 19 per cent across the eight capital cities in the past year, with units rising by 12 per cent.

“Buyers who are open to relocating can benefit from lower prices in regional areas or smaller cities,” Mr Whitten said.

“I moved from Sydney to Melbourne, partly because of property prices. When you re-examine your property budget in a different market, you suddenly have a lot more options.”

Over the course of 2020-21, regional prices grew as city-dwellers took on sea and tree changes.

People from the city have increasingly moved to regional areas as they are more affordable than urban suburbs. Picture: NCA NewsWire / David Swift

Underquoting was also listed as a major problem impacting first home buyers, with many being told a figure 20-30 per cent lower than the listed price.

“Many are being forced to spend more than they had hoped, but this will have consequences down the track on buyers’ ability to service their loans,” Ms Megginson said.

“Underquoting is illegal, but it does happen, particularly in the case of auctions, where underquoted prices can attract more buyers and lead to a bidding war.”
MORE:
Mesmerising $12m Love Island home hits the market
Sydney castle for sale with moat, other wacky features
Shock move as daughter buys absent parents a new home

Originally published as First home buyers: one-third of Australian first timers can’t afford their homes