First Home Buyers: what does it really take to buy your first home?

First home buyers have been returning with force to Australia’s housing market, with the number of first-home-buyer loans reaching a 5 year high earlier this year.

According to housing finance data from the Australian Bureau of Statistics, in January 2018, first home buyers accounted for a sizable 18% of home mortgage loans, the highest monthly share in 5 years. The latest data shows this figure is still sitting at a strong 17.9%.

New stamp duty concessions in New South Wales and Victoria are considered to be a major driver, along with lower mortgage rates, existing incentives in other states and tightened investor lending.

But despite the increased activity of first home buyers, Corelogic Head of Research Tim Lawless says that saving for a deposit can still be prohibitive for many, and this cohort remains a small percentage of all buyers.

“To combat this, ‘rentvesting’ – where you rent in your preferred area and buy somewhere more affordable – is likely to become more popular among younger buyers, as is staying at home for longer, or even moving interstate. This already growing trend for domestic migration out of NSW is set to continue as people consider how far their dollar will stretch outside of Sydney,” he said.

First home buyer tips: getting started

At Ironfish, over 86% of staff – in our Australian offices alone – are property investors. Many are also young first home buyers (FHB) and rent-vestors.

To provide some first home buyer tips, inspiration, education and some actionable next steps, we asked some of our Ironfish FHBs to share how they managed to get their foot on the property ladder.

Libby Hunter, Senior Housing Co-ordinator

“In my first job, fresh out of uni, I spent pretty much everything I earned. Most of my friends were doing the same thing, and we were all in that mindset.”

“When I started at Ironfish in July 2015, I was planning to move to London after about a year and do a working stint there. But working here – and for the first year, I worked directly with our Property and Research Director Grant Ryan – this made me realise fairly quickly that buying a home and investing in property was a good path to get on. So, I changed my plans, started saving and decided to invest instead.

“To save up for a deposit at that early stage in my career, when I was on a junior income, meant that I had to be really restrictive about what I spent my money on. Living with my parents helped me to save as well. But I also realised that I’d probably need to get a second job to meet my savings target. This drove me to take up a casual job as a receptionist on weekends.

“Working with the projects team at Ironfish, I also learned a lot about purchasing off-the-plan (OTP) property. I think a lot of people don’t know much about the process of OTP, which is quite different to buying existing property, so many first home buyers who feel like they can’t get in the market aren’t considering this option.

“For example, buying new meant that I could put 10% down first, and have another 2 years to save the remaining 10% deposit – in the Sydney market it can be tough to save your 20%.

“My parents were also willing to contribute to part of my first 10% deposit. They were willing to help because they knew I was getting a weekend job to help save the remaining 10% and because I was buying in the same area as them.

“Once the property settles I plan to live in it for a while, and then eventually rent it out and maybe rent a bit closer to work. That’s how most people get started, I think.”

First home buyer tip: Buying off the plan provides you with more time to save your 20% deposit.

Lynn Doan, Property Analyst

“I always wanted to buy a house, and I’d been saving on and off since I was 17 or 18. But it was my mum who really encouraged me to enter the market. Her thinking was: I’d been working for a while, so I should be able to buy something!

“Unlike Libby, my mum didn’t really mind where I bought, as long as I bought! So basically, I looked at what I could afford. After looking at a few different areas, a friend suggested Campbelltown; I’m a valuer, so I did some research and ended up settling on a 550sqm existing house. It’s close to shops and to the hospital, so it ticked all the right boxes.

“I did really have to push to make it happen though, because finance was tough at the time. But I found a mortgage broker who was able to navigate various challenges so that I could get the finance. It goes to show how much a good broker can help!”

First home buyer tip: Look in areas you can afford, and find a good mortgage broker to assist with the loan process.

Vivien Liew, Client Care Manager, Perth

“When I first started at Ironfish, I was the youngest team member there. All of my colleagues – be they admin, strategists, management – all owned at least one investment property. It made me determined to buy my first home and I set myself the goal to make a purchase by the age of 25.

“What I also learned is that my first property wouldn’t be my ‘forever home.’ I think a lot of younger people want to buy in their preferred location – they completely forget that they can rent-vest. So that was my plan.

“Back then, I was just a casual, earning an hourly rate. So if I was going to save a deposit, I needed to make sure I was saving everything – I even saved on rent by staying on a friend’s sofa for 6 months!

“But the first thing I needed to save for was to buy a car, so that I could work two jobs – this would have been impossible to manage by relying on public transport. After about a year of saving, I bought a car. I then took up a second job waitressing – so I’d work at Ironfish till 5:30pm and then drive to the next job working till midnight, then come home and repeat! But I knew I wouldn’t be waitressing forever – it was just going to help me get my foot in the door.

“I decided to buy off the plan, because I knew I wouldn’t be able to settle the property straight away. I don’t have any family here in Australia, so I couldn’t live at home, so it took me longer than others to save the entire deposit on my own, but I got there.

“With the help of one of our Perth Strategists, I bought in ‘Stirling Cross’, an Ironfish selected development, about 4 months after I turned 25 – so I achieved my goal! I settled last October, lived in the property for the first 6 months and now I plan to start renting it out. I’ll be renting elsewhere, paying less rent than I’ll get for my property at Stirling Cross, and then this way I can also enjoy the tax benefits that come with keeping it as an investment property.

“I think it’s really important for first home buyers that you don’t buy the most expensive or look for the ‘best’ – instead buy something that’s affordable and something that you’re going to be able to hold – think about your cash flow – this is especially important when you’re younger.”

First home buyer tip: Be prepared to work hard! And compromise. Remember, this won’t be your “forever home”, but it is the important first step in getting there.

First Home Buyer Grants and Incentives – what you need to know

If you’re looking to take the next step towards home ownership, it’s worth getting up to speed on what types of incentives and concessions are currently available.

There are several government first home owner / new home / home buyer incentives to help tackle affordability. These differ from state to state and may change over time.Please contact your local Ironfish office for more detail and assistance in understanding how each of these work in each state.

A new strategy

Buying your first home may take a different approach to what you had previously imagined – rent-vesting perhaps, buying in a more affordable city, considering off-the-plan, taking a temporary second job, or, if it’s an option, convincing mum and dad that you are serious about investing in your future and taking a ‘Bank of Parents’ loan.

In sharing some of our young first home buyer staff stories, we hope to inspire all prospective first home buyers that it is definitely achievable – and there’s no need to give up your dream of home ownership anytime soon!

If you need some help navigating through your options as a first home buyer, feel free to book a complimentary appointment with one of our experienced property investment strategists in your local city.