First-time buyer’s guide to property in 2021

Young house hunters are keener than ever to snap up their first home — but experts say many have knowledge gaps when it comes to the buying process.

Buyer’s advocates are reporting a particular lack of awareness around the extra costs associated with purchasing property and obtaining a loan.

Advantage Property Consulting director Frank Valentic said the costs coming as a shock to many first-timers included conveyancing fees (typically about $1500), building and pest inspections ($500-$800), and lender’s mortgage insurance for those with deposits of less than 20 per cent ($10,000-$20,000).

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Body corporate costs stung many naive first-timers too, as did “making the mistake of going for a cheap honeymoon interest rate that after a year, converts to a much higher rate”.

First homebuyers will also need to be more astute and disciplined this year to withstand mounting pressure to make snappy purchasing decisions as house prices across the Gold Coast continue to rise.

CoreLogic data revealed prices have increased by an average of up to 4 per cent in the region, which can partly be attributed to a rise in panic buying as property seekers race to beat further hikes.

CoreLogic head of research Tim Lawless said low interest rates and a shortage of available housing were creating “urgency” and buyers were under more pressure to act quickly.

Real Estate Buyers Agents Association president Cate Bakos said it was natural for first homebuyers to develop FOMO – the fear of missing out — in these conditions.

“The problems come when there’s frustration,” she said. “Buyers keep getting outbid and they see prices go up. Eventually they start going well over budget just so they can end the search.”

Ms Bakos said the solution was to become an expert on local prices. “Buyers who are repeatedly outbid are usually going for properties that are out of their budget to start with,” she said.

“Sold prices for comparable properties are a better indication of price than what the agents quote, which is usually much lower.”

Mortgage Choice’s James Algar said a telltale sign a buyer wasn’t ready to purchase yet was if they were seeking pre-approval for a loan without researching prices in their chosen area.

“Very often they haven’t got a clue what they need to spend because they haven’t looked at sales or even decided what area they want to buy in,” Mr Algar said.

Binvested founder Nathan Birch, who has bought more than 200 properties, said good buying required “discipline” and “confidence”.

“You need to have a pretty strong idea of what a property is worth and that takes work. It’s a lot of research,” he said.

“If you’re going to auction you need to decide before it starts exactly what you’re prepared to pay and stick to it. Don’t go over, keep the emotion out of it.”

Ms Bakos said first homebuyers should keep in mind agents usually went to great lengths to put home seekers under pressure.

“It is their job,” she said. “They want you to feel like you might miss out, so that you will stretch your budget.

“Sometimes it helps to simply ask the agent if there are any other offers on the table and, if they are putting pressure on you to make an offer, find out if there is a genuine vendor deadline.”

Finder home loans expert Sarah Megginson said before shopping for homes, budding buyers should document their regular expenses to make sure they can afford the “long-term commitment” of the home loan.

“It’s so much more than swapping rent for a mortgage,” she said.

“You’ll also have to pay council rates, and strata fees if you buy an apartment. All the property expenses become yours — you can’t just ring your landlord and say, ‘can you send over a plumber?’”

Online calculators can help first-timers figure out their borrowing capacity, but Ms Megginson said engaging experts such as an accountant or mortgage broker made sense. The latter could make navigating the loan process — including choosing a major or second-tier lender and a fixed or variable interest rate — much simpler.

Sam Grima, a 27-year-old structural engineer, did just that when he bought his first home, a three-bedroom townhouse in Vue Terrace Homes in Robina after a six-month search.

“I didn’t think a brand new place would be in my price bracket, but my dad made the point about being able to take advantage of the grants,” he said.

Mr Grima used the $15,000 First Homeowner Grant to put a 20 per cent deposit on a $629,000 three-bedroom townhouse, which he moved into late last year.

Being a new-build he was also exempt from paying stamp duty.

Mr Grima said his mortgage broker was a huge help when he felt overwhelmed.

“I could have done it myself but it would have been so much more stressful. As a first-home buyer you don’t know what lender to go with, or what the best options are, but a broker will give you all the info you need to make the right choices,” he said.

Mr Grima also advised taking advantage of as many grants as possible.

“If you are eligible, they are worthwhile. Especially if you buy a new-build. They may seem like small things but they do add up.

“The first homeowners concession and not having to pay the mortgage insurance really helped me, plus I also had the support of the Vue team who were amazing.”