Is Now The Best Time For First-Home Buyers To Pounce On Property?

Property prices are falling, the cash rate is expected to be cut next week, and the uncertainty of a federal election is over.

This has prompted some key bodies and housing experts to encourage those able to make the leap and get into the property market.

The Real Estate Institute of NSW (REINSW) made the bold claim on Wednesday that “now is one of the best times to buy a home in over a decade”, citing falling or steady property prices across the state as a key indicator to get in.

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“With the elections now over, we have stability at a government level, together with the lowest property prices the state has seen for a very long time,” CEO Tim McKibbin said.

“We see that prices are bottoming out and together with the fact the market is starting to settle down after the banking Royal Commission and even talk of more interest rate cuts on the horizon, if anyone is looking for a ‘go’ signal, it would have to be now.”

sold sign
Falling house prices and home loan rates lowering make the current market a favourable one to buy in, experts say. Photo: Getty.

In the last week alone, seven lenders have lowered their rates on more than 48 owner occupier fixed and variable home loan products, according to comparison website Finder, with the number of lenders rising to 40 over the month of May. Next week, the RBA is widely expected to cut the cash rate after 31 months of no change, which Finder predicts will cause a "flurry" of further rate drops.

Domain Research Analyst Eliza Owen said that while Domain's data is still seeing house prices continue to fall, more and more analysts are warning we could be approaching the bottom of the downtown.

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“We’re seeing things like mortgage rates potentially coming lower, which would enable people to borrow more and bid up house prices, we’re seeing the auction clearance rate bounce back, which tells us the market could be entering recovery," she told 10 daily.

“In that sense, generally, it would seem like a good time to get into the market.

"However, the important thing to remember is that our latest data sets [show] we're still seeing prices falling, and as long as prices are falling, there might not be any rush to get into the market."

The median house price in Sydney for April 2019 was $897,000, according to Finder. Photo: Getty.

Mark Crosby, an economist with Monash University's business school, is hesitant to call now the "best" time to get into the property market, but concedes it's significantly better than 12 to 18 months ago.

"It’s a good time to be looking," he said.

He points to Sydney and Melbourne's skyrocketing house prices over the past decade as directly related to immigration, with both cities seeing about 100,000 people -- some domestic, but mostly international -- arrive each year for the past decade.

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“That’s the key factor,” he said. “So what would cause that housing market to pick up and take off a little bit again? That 100,000 flow continuing to happen.”

He thinks it’s likely immigration will slow somewhat, thereby slowing house price growth, but that it’s “very unlikely” we’re going to see demand for both housing and living in Melbourne and Sydney fall away in the next few years.

There's also the matter of the Coalition's new First Home Loan Deposit Scheme, whereby first home buyers need only save 5 percent of a deposit (usually needed to be 20 percent), with the government covering the lenders mortgage insurance.

The property investment cycle. Photo: Renovating For Profit.

Crosby was critical of the scheme, saying there was a real worry amongst economists that this policy would affect the demand side of the market, but not do much for supply.

“I’m not a fan, to be honest. It’s probably not going to help first home buyers that much, and depending on the detail of how they [the Coalition] do it, there’s some other costs that first home buyers have to incur, and it would certainly be interest costs of having a bigger mortgage."

“There’s better ways of getting young people into appropriate housing.”

Meanwhile, Owen crunched the numbers, and worked out that taking advantage of the scheme could cost buyers an additional $53,000 over the life of the loan.

“Even where the government is offering to go guarantor, which seems like a pretty equitable policy, the thing is you’re still borrowing a large portion of the house, so that’s going to add to your interest costs over time,” she said.

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