The best time to buy your first home

Read on to find out when you should try to buy, and how you can use government schemes to help you.

Read on to find out when you should try to buy, and how you can use government schemes to help you.

If you’re anything like us, you’re feeling a bit overwhelmed by all the information being thrown at first home buyers lately. 

It seems like the government wants to help us buy a house (yay!) but we still need to know a) when we should try to buy and b) when government schemes kick in to lessen the cost. 

Never fear.

Below is the information you need to help you find out when the best time to buy your first property is.

First up, property prices are dropping

PropTrack expects property prices to have dropped by 10-15% by the end of 2023.

May was the first time since the beginning of the pandemic that we saw property prices fall across Australia. They dropped nationally by -0.11%. 

Sydney saw prices fall in May for the second month in a row (!!), down -0.29%, with Melbourne (-0.27%), the ACT (-0.12%) and Hobart (-0.05%) also seeing a continuation of slowing growth.

More property is coming onto the market as well. New listings in capital cities were up 12% compared to the month prior. 

You know what that means? More property for sale means the prices drop, because demand does not meet supply.

It’s because the interest rate is rising

“Our expectation is that the prices are going to fall as interest rates rise,” Cameron Kusher, Director Economic Research at PropTrack told The Oz. 

But how long is the interest rate going to go up for?

“That’s the $100m question,” Kusher said. 

“Interest rate hikes are going to be pretty rapid this year, we'll probably be above 2% cash rate by the end of this year.

“(We) are expecting that sort of by late next year, early 2024, we could be seeing the interest rate hikes reversed.”

Kusher’s forecast is backed up by the man who controls Australia’s interest rate, head of the Reserve Bank, Phil Lowe.

Just today he said Australians should “be prepared for more interest rate increases” in an attempt to quash the cost of living. 

A quick refresher on why we need to raise the interest rate:

So is the best time to buy when the interest rate is at its highest, and property prices are at their lowest?

Not necessarily. 

As we mentioned, property prices are forecast to be at their lowest at the end of 2023 when the interest rate is at its highest. 

But as the interest rate goes up, the amount you can borrow goes down.

“The expectation for anyone getting into the market should be that you're going to have periods of higher interest rates and lower interest rates,” Kusher said. 

“Maybe the top of the interest rate cycle is the best time to get in because from there your mortgage repayments are gonna get easier. 

“But on the flip side of that, if you're buying at the top of the interest rate cycle, your borrowing capacity is probably not going to be as strong as it would be if interest rates were a lot lower.”

Incentives to make it easier

NSW stamp duty is being abolished

Brilliant news for all first-home-buying-Sydneysiders who will no longer have to put thousands of dollars towards "the worst tax".

Premier Dominic Perrottet announced the changes as part of the state budget on Tuesday, which will give first home buyers the option of paying an annual property tax instead of stamp duty. 

Those who opt-in will pay an annual property tax of $400 plus 0.3% of the land value of the property.

Currently, the estimated stamp duty on a $500,000 home in NSW is $17,990.

The property tax option will be available for properties of up to $1.5m, and will be available from January 16, 2023.

Shared equity scheme

Perrottet also introduced a "shared equity" trial for 3000 homebuyers a year.

It's a similar concept to Anthony Albanese’s promise to implement a “Help to Buy” shared equity scheme in early 2023, where the government co-purchases a home with a first-home buyer, thus reducing the amount needed for a deposit.

For a new home, the NSW government will pay for up to 40% of it, and for an existing home, they will pay up to 30%.

The trial will last for two years and be available to first-home buyers who are nurses, teachers, police, singles over 50 or single parents.

Single participants must have an income below $90,000, or $120,000 if they're a couple. They must have saved at least 2% of the house price as a deposit.

It will begin in January 2023.