With time rapidly running out for first home buyers to take advantage of the $14,000 First Home Owners Boost, thousands of would-be buyers will want to get on the property ladder while there are some government hand-outs to help them.

But is it worth it?

Property prices have risen in most areas across Australia, especially in the first home buyer price range.

Residex founder John Edwards says grants to first home buyers merely force property prices to rise by the value of the grant. And RP Data and Rismark are showing house price values rising by more than 6 per cent in Sydney and 8 per cent in Melbourne in the first seven months of 2009.

Some property forecasters believe the run-up in prices for first homes will stop once the Federal Government winds back the boost by December 31. From October 1, first home buyers can access $10,500 to buy an established home but by January next year it reverts back to $7,000.

Experts are also predicting that investors and people upgrading to bigger homes will start buying, just as demand for first homes tapers off.

So what should would-be buyers do? Buy now or later?

WEIGH UP WHAT YOU CAN AFFORD?

With threats of rising interest rates, it’s important that buyers stay within their limits and can afford to pay their mortgage even if there is a two per cent rise in interest rates.

It’s no use buying now if one interest rate rise wipes you out and puts you on the financial edge.

Banks are lending less money to first home buyers, and demanding at least 5 per cent genuine savings as a deposit, making it harder to secure financing. For example, this time last year, St George would lend most first home buyers up to $455,000 but this year it’s down to $400,000.

If you’re finances are in order, you have saved a deposit and can afford at least a two per cent rise in rates, then buying now may not be a bad idea.

IF YOU CAN FIND THE RIGHT PLACE:

A surge in demand for first homes often means there are less desirable properties on the market. Good properties sell very quickly, while “problem” properties linger for sale longer.

A problem when the first home buyer market heats up is that it becomes harder to find a desirable property, as too many buyers are competing for the same prize.

Typically, investors who have allowed their properties to be unmaintained will try to sell when they think they can get the best capital price – like right now!
If you want a first home to live in for several years, then it’s important not to compromise on your desired criteria just to “get in” to the market.

Set your list of property goals, and be prepared to compromise on four out of five – but no more. Remember, a quality, liveable property will always be easier to on-sell than a property with too many drawbacks.

BUT WHAT IF THERE’S A BOOM?

Some forecasters are predicting property prices will continue to rise throughout 2009 and into 2010.

A calm, level-headed buyer knows that property prices may rise but it does not matter. If a potential buyer still has their deposit in the bank, the pre-approved mortgage ready to go and a steady income then they can always buy when the right property comes along.

In fact, extra time might allow would-be buyers to save more deposit and be able to bump up what they can afford to pay to beat the others to a quality property.

If a first-time buyer can manage to save a 20 per cent deposit, they will literally save thousands of dollars on Lenders Mortgage Insurance, which only insures the banks not the buyers.

As interest rates rise through 2010 and the government grants for first home buyers are wound back, buyers might find it easier to seek out a desirable property for a price they can afford.

Do your research! 

onthehouse.com.au offers property sales data for you to do your property research.

• Check out Listings and Latest Sales Prices in your area for FREE!
• Sign up for our Premium Reports to do some in-depth research on historical property sales.

Photo From: stock.xchng 

Share This Page: