Yahoo Finance Clever first home buyer strategies to escape surging prices
First home buyers are snapping up older homes in need of a renovation, recent research has revealed, in an attempt to get a foot on Australia’s increasingly crowded property ladder.
Almost 80 per cent of Aussies are buying run-down houses in order to renovate it, according to Finder's First Home Buyers report, with nearly half (45 per cent) saying they’ll renovate immediately after or within five years of owning the home.
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City dwellers favour renovations more than their regional counterparts, and men enjoy renovating more than women do (85 per cent compared to 74 per cent).
Aussies last year spent a whopping $63,118 per renovation, with kitchens, bathrooms and outdoor areas the preferred projects of choice.
The strategy is an example of creative ways first home buyers are attempting to crack Australia’s rapidly-heating housing market, where property prices grew at the fastest monthly pace seen in 32 years in March.
The same Finder report also revealed one-in-five first home buyers were considering buying interstate in a bid to widen their search and escape increasing house prices in their area.
FOMO takes hold of first home buyers
Australia’s synchronised property upswing has created a feeling of fear of missing out (FOMO) among first-time buyers, said Finder home loans expert Sarah Megginson.
"With property prices showing no signs of slowing down and interest rates at an all-time low, first home buyers are getting creative with different tactics to get into the market,” she said.
Low interest rates have buoyed first home buyer demand for property, which surged by 21 per cent in the three months to 31 October 2020 compared to the same period the year before, NAB data revealed.
However, rapid rises in Australian dwelling values in recent months have sparked concerns that prospective buyers are being pushed out of the market. Recent Finder data also revealed Australia’s average house deposit is now six figures.
Megginson cautioned first home buyers against having too high expectations.
"In a hot market, it's not always possible to buy your ideal home, let alone your dream home,” she said.
“What some first home buyers are finding is that their best chance to get on the property ladder is by purchasing a 'fixer-upper' in a suitable suburb."
These sentiments have been echoed by Metropole Strategists CEO Michael Yardney, who told Yahoo Finance that first home buyers should be willing to compromise.
“Your first home won’t be your forever home. Don’t expect to live in the same type of property that took your parents 30 or 40 years to afford,” Yardney said.
“This may mean you need to live in an apartment rather than a house or a suburb adjoining your preferred suburb.”
Don’t let FOMO cause you to overstretch your budget, either, he added.
“They haven’t left money aside for all the little expenses they’ve forgotten,” Yardney said.
“Others are cutting corners and not conducting building and pest inspections. Yet others are compromising on the standard of property or location just to get into the market.”
Money expert Nicole Pedersen-McKinnon believes the current market frenzy won’t stick around for too long, despite predictions of continued price rises for this year.
“The buying frenzy we are seeing now will not last. They never do,” she said.
“And prices will respond accordingly.”
Read next: 6 nuggets (of wisdom) for first home buyers
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