The property downturn is providing an opportunity for first homebuyers not seen for some time but it may pay to use some caution if looking to enter the market for the first time.
CoreLogic’s Tim Lawless says first homebuyers don’t need to rush immediately because Melbourne house prices are forecast to drop between 18-20 per cent from peak to trough.
“Prospective first-home buyers should be getting their finances in order to get the best mortgage rates,” he told Australian Financial Review.
“And then they should look for the property that suits their budget and lifestyle because property won’t be rising for some time.”
Chris Bates is a financial adviser at Wealthful and says first homebuyers should exercise caution if looking to buy an apartment.
“Apartment markets are driven heavily by investors and, with the upcoming election and the [proposed] changes to negative gearing, apartments will be hit harder than houses,” he told AFR.
“If they are single and first-home buyers, I would tell them to keep building their savings rather than rushing into the market just to get on the ladder.”
Mr Bates also said there could be danger in young couples buying stepping stone assets that they will sell at a loss in a few years when they have children.
One thing homebuyers want to be wary of is buying in a falling market like we have now and ending up with negative equity, as Laura Higgins from ASIC’s MoneySmart explains.
“If you can’t meet your repayments, your lender may choose to sell your house to recoup the money lent you,” she told AFR.
“If you purchased lender’s mortgage insurance when you got a mortgage, it’s important to look at the terms and conditions in the policy for what happens if you are forced to sell and are in negative equity.”