I have always enjoyed assisting first homebuyers. They are responsive and motivated, the look of elation on their face when they purchase a property makes it all worthwhile. A lot has been said about their plight, more particularly their struggle to achieve a foot hold on the property ladder.
First home buyers lack the experience to identify what is their optimum property. They also lack the confidence to jump off the buying cliff. It goes without saying that buying a first home is a huge step, not proceeding with a first purchase because of fear is a common and expected emotional reaction.
This is particularly the case given the unrelenting negativity about the state of the property market that is espoused by some media outlets. It is a lot easier doing nothing as against taking on a substantial financial responsibility.
Many first home buyer’s reasons for not buying are illogical. It comes from a desire to push a difficult decision sometime into the future.” I am waiting for the market to go down”, “my financial advisor told me not to buy a property now” are common reasons.
Many are looking for good news on the economic front. There is rarely a perfect time to buy property and when it seems that way, first home buyers end up competing amongst themselves therefore paying a premium.
Over my lifetime Melbourne has changed, mostly in the right direction. It has provided world class amenity becoming a highly sought after city to reside in. The increase in demand for housing combined with a shortage of supply has resulted in property prices increasing steadily.
When I first started out in real estate, first home buyers were able to purchase a detached house with a back yard in inner to middle ring Melbourne suburbs. Because house prices have grown a lot quicker than wages the reality now is that first home buyers don’t have the financial capacity to achieve such a purchase. Instead, their first home is likely to be an apartment, villa unit or townhouse. Given the evolution of Melbourne, this outcome is not surprising or even unfair.
Because of excess supply, apartments, villa units and townhouses can be a terrible investment, returning little capital growth in the medium to long term. It is therefore important that first home buyers choose a property that will produce reasonable capital growth. If this occurs equity will be achieved which will set them up to upgrade to a house purchase in the future.
Because first home buyers do not have the experience to identify investment grade real estate, invariably they will either delay their purchase or make a bad decision. Both these scenarios will negatively effect their ability to eventually purchase a house in their desired location.
First home buyers need professional advice more so than any other buyer segment; however, they are the least able to afford it. It is difficult to recover from a bad first property selection or equally as bad, putting off a first purchase for an extended period of time.
My role as a buyer’s advocate has been to explain the pros and cons of any property a first home buyer might be contemplating. Most importantly giving them confidence to proceed once the optimum property has been identified.
