First Home Buyers 2010 checklist

The home buying rush from the doubling of the First Home Owner Grant is expected to slow down now the grant has returned to its basic $7000.

While there is still the opportunity for buyers of new properties in NSW to enjoy an extra $3000 incentive from the State government, for most first home buyers the figure has dropped back to the original $7000 since New Year’s Day.

As a result, there is expected to be a slowing in the growth of property prices across typical first home buyers markets such as Fairfield, Shalvey and Ropes Crossing in Sydney’s outer western suburbs.

According to John Lindeman of Residex, house prices in such areas were enjoying 15-16 per cent growth back in November and while he does not expect prices to actually fall, he says there will be a slowing.

This is also the view of Mitchell Watson of Canstar Cannex who observes that lending to first home owners will revert to more normal levels this year.

“First home owners as a proportion of overall lending are now back down to normal levels, leaving more space for others such as those looking to upgrade to a second home,” says Watson. “The rising interest rates will also reflect a more measured approach to home buying and home borrowing in 2010.”

But that does not mean there are not still opportunities for first home buyers to get into the market.

Tips for getting on the property ladder

• Reduce credit card debt and cancel multiple credit cards. Having a lot of available credit will be considered by a lender to be a financial obligation in the future, even if you owe nothing on the cards right now.
• Tidy up your personal debt so that lenders will be happy to lend money to you.
• Save, save, save. Delivering a solid record of savings will help you increase your appeal to lenders and it will mean you have to borrow less. Ideally you should aim for a 20 per cent deposit so you can avoid paying lenders mortgage insurance which can set you back by about 2 per cent of the value of the property. Although a one-off payment, you still have to find the money on top of the sale price.
• Arrange for a loan pre-approval. This not only takes out the hassle of having to arrange a loan once you have found your dream home but it also means you know how much money you have to play with.
• Plan ahead when it comes to conveyancing, building and pest inspections. If you already have these lined up, it will take some of the stress out of purchasing your home, particularly when time is limited to complete the inspections and settlement.

Meanwhile Shaun Cornelius, CEO of Infochoice says first home buyers should prepare themselves for future interest rate rises, even though the Reserve Bank has indicated it intends to keep rates on hold in February.

“Limit your maximum borrowing capacity so you do not overextend and make sure you have enough cash saved in reserve for an emergency,” says Cornelius. “Ensure you can still service your loans if interest rates should increase by at least 2 or 3 per cent."

The first home owners grant may be back at $7000, but if you are purchasing your first home, then you may be exempt from paying stamp duty. In Queensland, for instance, you can save more than $3500 in transfer stamp duty on an established home worth $300,000 as a first home buyer.

The expected flattening in prices should also hold you in good stead when buying.

If you are planning on getting into the housing market, then any time is good as long as you buy well, don’t overextend, have a sufficient deposit and give yourself an adequate buffer to cope with interest rate hikes up to 2 or 3 per cent.

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