Tyler Durden's Fight Club Blog

Industry insiders say a savvy first-timer should just smile and nod graciously when family and neighbours put forward their property predictions, then turn to those actually in the know if they want to get serious about buying.

Getting a leg up on the property ladder isn’t what it used to be. Four decades ago, a typical home in a capital city was about five times the average household annual earnings — today it’s up to 10 times that.

But this generation of first timers actually has a huge advantage over their predecessors. Today there is a wealth of information online when it comes to househunting homework.

And while the volume of first-home buyers is still down on previous years (when government grants were at their peak) first-timers are creeping back into the market.

According to a recent study by Adelaide Bank and the Real Estate Institute of Australia, the number of first-home buyers rose by 3.6 per cent over the past quarter to 26,955. The group now makes up 15 per cent of all owner-occupier purchasers.

However, the long-term average, according to the survey, has historically been 19.7 per cent of the market.

So now that the average loan size for first-home buyers is a whopping $352,700, and a commitment of more than two decades, young buyers need to do their sums and make some tough decision before leaping into a home and a loan.

To get on the right track here is some sage advice from a few of the best property players in the business:

MARK BOURIS
Executive chairman of Yellow Brick Road

“When I bought my first home I didn’t buy anything fancy. I just got into the market and that’s what you need to do today,” he said.

“That’s not an easy task with average home prices, so if it were me, I would make sure I was not getting caught up in ‘bad debt’. Going out and buying a bunch of jazzy things such as a new vehicle with a car loan, or taking a big holiday on a personal loan will stop you from getting to your goal,” he said.

Mr Bouris, who is also the big boss on reality TV show The Celebrity Apprentice Australia, added that creating a budget and a savings plan and getting disciplined is “absolutely necessary” these days.

“One thing that can be problematic for today’s first-home buyer is employment stability. It’s critical to getting approval for a loan, that you’ve not moved jobs too often. Be aware of this if you are thinking of buying in the coming years.”

“Banks want to be confident that you are going to have a stable income to pay back the loan and that your employment history shows this,” he said.

And another of Mr Bouris’ hot tips is to be flexible on the property location.

“Don’t be closed minded about the suburb you want to live in. Consider adjoining suburbs in the area or an investment property in a completely different location. What is important is closeness to amenities such as schools and public transport.”

“Remember your first home doesn’t have to be your dream home. Be willing to start at the bottom, get in to the market and from there you can begin to take steps to move up into bigger and better places,” he said.

JOHN SYMOND

Chairman of Aussie Home Loans

“Work out how much you can afford to spend before you even look, and only look at homes within your price range. Knowing how much you can afford can be easily done by calling a mortgage broker like Aussie,” said the self-made multi-millionaire.

“Buying a home is a time consuming and emotionally charged experience. Do not waste your energy looking in the wrong direction. Look at as many properties as possible in your price range to get an idea of what and where you can afford.”

“Aussie” John said buyers need to ensure the land, house or apartment is not overpriced, so his advice is to check the prices paid for other properties in the area you want to buy in.

“Shop around for the best possible home loan you can afford, both in the amount of deposit required and in ongoing monthly payments. Look at the fine print for monthly service fees and other charges. If you’re worried about ongoing interest rate rises, can split your loan between variable and fixed rates.”

The key to managing your money once you’ve locked in a loan is finding a way to make your financial set up work for you.

“Seek weekly or fortnightly payments (not monthly) so the interest payments do not mount up.

Get a loan with no ongoing fees and charges and be assured a low start-up or honeymoon rate will not be much help to you in the long term, as they usually come with monthly fees or charges.”

But the money guru’s ultimate tip is to only buy within your means.

“Make absolutely sure your home loan repayments do not overly impact on your lifestyle. You do not want to eat baked beans for the next 25 years!”

LEANNE PILKINGTON

Director of Laing & Simmons Estate Agents

“You need to get your priorities right and just remember that every generation has its stories. No generation has been able to have everything at once,” she said.

If she was buying her first property in today’s economic climate, Ms Pilkington said she would have a few stern lessons for herself.

“I’s say I needed to be prepared to buy where and what I could afford. Not what I wanted. I’m not sure everyone gets that. Be realistic about what you can buy,” she added.

“And get organised ahead of time, do lots of research and be ready to buy because in some markets are moving so quickly you don’t have the luxury of thinking it over for weeks and weeks and showing the home to friends and family when you find the right one. I think that can be hard for first home buyers. I hear of so many missing out because they took too long to decide on a purchase,” she said.

Perhaps haunted by the 17 per cent home loan interest rates she suffered through when starting out at a homeowner, Ms Pilkington said she would strongly advise first-time buyers to think how they would afford a rate rise.

“I know we’re in a period of extremely low interest rates, which is great, but it’s just not going to last forever. Honestly it really scares me how big the mortgages are that young people are taking out today.”

“But just remember, I does get easier. Chances are that within five years your mortgage will be more or less under control and then you can make a decision about what to do next,” she said.