Australia’s real estate industry has been put to the test in 2020, and while the coronavirus pandemic has forced the sector to slow down, first-home buyers are doing the opposite.
Since the beginning of the year, we have seen a surge in first-home buyer enquiry on realestate.com.au and the health crisis appears to have been no obstacle for this buyer group.
First-home buyers are able to identify themselves and then contact an agent on realestate.com.au, which gives a clear indication of the number of first-home buyers searching the site.
If we compare June 2020 to June 2019, we have seen very high levels of first-home buyer enquiry growth across Australia with the biggest increases in Perth and Canberra. Even in Sydney, which has seen the lowest growth, the increase has been almost 50% up on last year.
What is behind the swell in first-home buyer activity?
Given the country is in the middle of a recession because of the health crisis, you would think first-home buyers would be less enthusiastic about taking the plunge into the property market. However, there are a number of key drivers behind this trend:
There are a number of key drivers behind the surge in first-home buyer activity during COVID-19. Picture: realestate.com.au/buy
1. Government incentives
All state and territory governments offer targeted programs to help first-home buyers break into the property market, while the federal government’s new 5% deposit scheme has also been exceedingly popular. The Prime Minister Scott Morrison recently announced the HomeBuilder scheme, which also stands to benefit this buyer group, although it doesn’t specifically target first-home buyers.
2. Investors are backing off
Investors are showing low levels of activity in the COVID-19 property market, which is giving first-home buyers the advantage as the two buyer groups typically target similar properties. With fewer investors, first-home buyers are finding it less competitive when buying property.
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3. Limited price growth
For many Australians, buying their first home is one of the biggest decisions they will ever make so a slower market during COVID-19 is giving first-home buyers more time to decide what their best move is.
4. Interest rates are at record lows
Banks are being cautious given the uncertainty in the job market because of the health crisis, so it isn’t easy to get finance. However, a securely-employed first-home buyer is generally seen as a relatively safe borrower.
Low interest rates are a strong incentive for securely-employed first-home buyers. Picture: realestate.com.au/buy
Is it a good time for first-home buyers to take the plunge?
Pandemic aside, whether or not it’s a good time to buy depends on personal circumstances, particularly job security, which has become wobbly for many Australians who have been stood down from their jobs as a result of COVID-19.
Additionally, the best time to buy depends on how long a first-home buyer plans to hold a property. If the buyer plans to sell the home within two years, it would pay to be more cautious at the moment given it is uncertain what will happen to house prices over the next six months.