Herron Todd White flags hopeful signs for aspiring first-home buyers

Saving a deposit is one barrier faced by FHBs

Herron Todd White flags hopeful signs for aspiring first-home buyers


By Mina Martin

The path to homeownership has never been easy, but after an extended period of even tougher conditions, there are some hopeful signs for aspiring first-time buyers, according to Herron Todd White’s Kevin Brogan.

In HTW’s October Month in Review, Brogan (pictured above), national director of group risk and compliance, said among the many challenges Australians face when getting into the first rung of the property ownership ladder were saving a deposit and access to affordable housing.

“Saving a deposit can take years in some instances,” Brogan said. “If you are borrowing more than 80% of the value of the property, then you will almost certainly need to pay for lenders mortgage insurance, the premium for which can be thousands of dollars. Stamp duty is also a significant financial impost in most states and territories.”

But saving for a deposit has become much harder now that higher living costs demand a bigger chunk of the household income, he said. Rent prices, in particular, have seen a significant rise, and higher interest rates have slowed property value growth, although there has still been growth in many locations.

“This has led to the 'bank of mum and dad' becoming an increasingly important source of funds for first-time purchasers,” Brogan said.

In March 2022, a Parliamentary inquiry into housing affordability and supply in Australia made 18 recommendations aimed at enhancing the supply and accessibility of affordable housing, with particular focus on assisting first-time home buyers.

Several programs, exemptions, and grants have been launched to facilitate homeownership. Various stamp duty concessions and grants have also been made available by governments for eligible applicants. Shared-equity schemes were also introduced by some governments to reduce the up-front cost for first-home buyers, while affordable housing schemes involved government entities selling homes to first buyers at reduced prices.

Brogan said that with the number of new homes being built reduced due to construction costs and delays, the supply of housing is facing heightened scrutiny.

“The use of prefabricated (factory built) homes is being suggested in Australia and overseas as a mechanism to quickly increase the supply of affordable housing (there are efficiency and cost benefits, although an alternative borrowing or funding method for their construction will need to be developed),” he said.

But things are getting more optimistic for first-home buyers as we progress through the spring residential property season.

“There has been an increase in the number of properties listed for sale which should act to soften continued price growth,” Brogan said. “The Reserve Bank decided at its October meeting to keep the cash rate on hold again (albeit with a warning about continued inflation), which may bring a little confidence to first home buyers that mortgage repayments are not going to continue to increase.”

ABS has paused first-home buyer data reporting and warned against relying on the last 12 months’ data. When data reporting resumes, it will be closely watched to identify trends and impact of policy setting in encouraging first-home buyer activity, HTW reported.

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