First home buyers are considering homes across state borders as the rapidly surging Australian property market forces them to get creative, new research has found.
One in five first home buyers are now considering buying in a different state or region, or around 2,362 people a month, Finder’s First Home Buyers Report revealed.
It found New South Wales first home buyers were more open to buying interstate than buyers in Queensland and Victoria, and that many buyers are widening their searches to take advantage of the current ultra-low interest rates and to escape rocketing house prices in their home area.
Also read: Sign interest rates are about to go up
NSW buyers were the most likely to look in the ACT or Queensland, while 28 per cent of first home buyers are looking in regional areas.
Across both Queensland and Victoria, buyers considering moving are most likely to look at the ACT or NSW.
However, Finder home loans expert Sarah Megginson said buyers should always remember to do their research before buying, and avoid jumping in due to a fear of missing out.
“You’re better off spending a few more months getting your finances into shape and waiting until you can comfortably afford your mortgage repayments, regardless of what other people might be doing,” she said.
“Focus on your own timeline. Think about things you can do to cut costs and speed up your deposit savings. If you’re still keen to buy sooner rather than later, purchasing interstate could be for you.”
Expats fuelling house price engine
First home buyers are currently battling a housing market growing at its fastest monthly pace in 32 years.
Home values increased 2.8 per cent over March, while in Sydney values rose a staggering 3.7 per cent - or $51,442 for standalone dwellings.
According to Westpac, this rapid increase is partly down to a “tidal wave” of expatriate professionals returning to Australia during COVID-19.
Between March 2020 and January 2021, more than 446,000 expats have returned to Australia, with real estate agent Ben Collier describing overseas buyers as a “dominant force” in Sydney’s eastern suburbs market.
“Contrary to many people’s prejudices the vast majority of overseas buyers that we see aren’t foreigners driving up prices for locals. They’re simply expat Australians who are living overseas and looking to return home, or invest in property here,” .
“Thanks to border and travel restrictions as a result of COVID-19, these expat buyers are making up a larger proportion than ever before of the purchasers actively seeking to buy property in Sydney’s east.”
It’s something Property Investment Professionals of Australia (PIPA) has also observed.
Buyers returning from Australia, often from more expensive property markets, are now backed by serious cash, and the resulting value increases is inevitable, PIPA chairman Peter Koulizos said.
“Expats from expensive cities like London, Hong Kong and New York often don’t consider our real estate prices unaffordable and are happy to pay what is necessary to secure a prestigious property in a desirable location,” Koulizoz said.
“Our members report that some of the sale prices being achieved in Sydney, for example, seem insane – even in booming market conditions – with new money or the expat factor the likely reason."
He said properties are now selling for hundreds of thousands more than expected, leaving buyers and professionals stumped.
“Cashed-up expats are certainly contributing to some of our silly runaway prices in Victoria, but we also have a lot of bottled-up energy from local buyers, too, particularly those who have managed to save during COVID,” said Cate Bakos, the president of Real Estate Buyers Agent Association (REBAA).
The impact of government incentives and low interest rates can’t be discounted, she added, noting that these have exacerbated the supply-demand imbalance.
“At the higher price points, and specifically in the family home markets, expats are represented by a reasonable share of buyers for certain,” Bakos said.
“Buyers’ agents are definitely privy to this, given expats are a cohort who typically do reach out for professional assistance, but it is fair to say that many expats are struggling to keep up with and accept the sheer pace of our market growth at present.”