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The changing face of the first home buyer

By Mary-Jane Hamer

It is becoming an excruciating experience for first home buyers trying to get into the property market. As fast and as diligently as people are at saving the deposit, prices are moving faster still. As a specialist in urban living (apartments and higher density), I’m seeing that we’re in a window of transition – first home buyers need to be more prepared and savvier to get a foothold in the property market.

At the start of the pandemic, cashed up investors and first home buyers drove demand for the urban living apartment market in the Lower North Shore. Their behavior in the market is transforming. First home buyers are more animated and assertive in this bullish market, and are doing whatever they can to secure the best of the available stock. They are passionate about securing a property to live in, it’s not just an investment and its return.

The Rise of the Savvy Saver

Ahead of the imminent COVID lockdowns and border closures, nomadic millennial travellers were compelled to redirect their travel funds into their savings accounts. According to the Allianz Global Wealth Report 2021, gross financial assets of Australian households rose by 5.2 per cent in 2020, with 12.4 percent landing in the bank, the largest increase since the GFC in 2008.

In order to stay competitive in this boiling market, millennials accelerated their financial activities. They have saved their last two European holidays worth of expenditure and these savings are being funnelled into home loan deposits. Potential buyers are scraping together savings, waiting for bonuses and utilising tax refunds to increase their deposits.

Savvy savers are rushing to lock in low interest rates following the recent serviceability measures introduced by the Australian Prudential Regulation Authority, which require borrowers to prove that they could maintain repayments if interest rates were to rise by 3 per cent. Combined with talks of the central bank raising interest rates earlier than expected, in the urban living space we have seen pre-approvals multiply. Competition is fierce. If you are in the position to get your finances in order, now is the time.

Rent, Board, Buy

The tradition of saving for a home deposit in your early twenties has become increasingly unfeasible in today’s property market. The Bank of Mum and Dad has become a primary mortgage (lender) backer as soaring prices have pushed deposits out of reach and first home buyers are relying on support from their parents.

Consumer research and analytics company Digital Finance Analytics estimates that just over 60 percent of first home buyers are receiving financial assistance from their parents. However, it’s not just millennial buyers who are relying on support. Many adults are returning to their parents’ home in order to save for a deposit – a Rent, Board, Buy pattern. This pattern is echoing across Sydney and is also a trend here in our market.

The Great Resignation

The Great Resignation is a phenomenon that has dominoed across the United States and is well underway here in Sydney, particularly in desk-bound long-hours careers in law, accounting and consulting. Professionals from a collection of industries have emerged exhausted and have resigned from their workplaces, opting for self-employment, side hustles or new flexible jobs.

According to behavioural scientist Aaron McEwan, from global research and advisory firm Gartner, recent research shows that up to three in five Aussies could be looking to change jobs as early as March 2022. Company boards and management are reconfiguring their priorities for 2022, now considering the challenge of retaining the workforce to be a top strategic priority.
Why does this matter? Potential first home owners who switch to self-employment will find it even harder to obtain finance in an already constrained credit climate.

Mary-Jane Hamer, Head of Urban Living
Ray White Lower North Shore Group
0419 191 019
mary-jane.hamer@raywhite.com

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