The Changing Face of Australian First Home Buyers

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With the rising cost of supply & materials and titled land shortages effecting affordability across the home building industry, the ‘Great Australian Dream’ of home ownership has become the ‘Great Australian Challenge’ for future first home buyers.

If there’s one thing that has been a constant in the new housing market for as long as I can remember it’s that the best time to buy a new home is always yesterday. And the next-best time is today. This has never been truer than what we are currently experiencing in Victoria.

Over the past ten years it has been clear that it is becoming increasingly difficult for first home buyers to purchase their first homes. You only need to look at the statistics to see the trend – the average age of a first home buyer is now mid-30s, with the average deposit required close to $100,000. It was only back in 2010 that first home buyers were still in their 20s and deposits in the $50,000 - $60,000 range. It’s not unforeseeable that in the next ten years first home buyers will be well into their 40s before entering the market.

Despite low interest rates making money more accessible than ever, the effects of the COVID pandemic, coupled with last year’s HomeBuilder scheme, have accelerated price growth and reduced land supply all at the same time - making it more challenging than ever for first home buyers.

With over 75,000 HomeBuilder grant applications creating unprecedented demand on the housing industry, and COVID shutting down our borders making the import of materials for construction trying, we ‘ve seen a 20% increase in the cost base of producing a new home in the last 6 months alone.

The uncertainty of Victoria’s lockdown policy, as well as restrictions on site, have also led to developers hitting the breaks on production of new land allotments - creating a scarcity of available titled land to build on. Simple economics dictates that a scarcity of supply and increase in demand leads to price escalation.

It’s a double whammy for new home purchasers.

But as the world slowly starts to open it’s not all doom-and-gloom for First Home Buyers. Savings are at an all-time high, credit card debit has been wound right back and according to the Reserve Bank interest rates are likely to stay somewhere close to 1% for the foreseeable future.

It’s going to take a bit more patience for buyers as timeframes extend out for land titles (and in turn construction of new homes), and an adjustment in terms of expectations - what is and isn’t possible given purchasing budgets - but land developer and builders need to keep trading... and that’s when we’ll see some real innovation begin to take place.

So, if you didn’t get into the market yesterday, it’s probably time to get serious.

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