Deciding to buy your own home for the first time is an exciting and life-changing step. For many people it represents a chance to build for the future and put down roots. Others may see it as a business opportunity, hoping to build up a portfolio of properties to sell and let. Whatever the motivations are, there are several challengers that people face as first time buyers. Here are some of the most common problems faced by first time buyers.
Rising House Costs
In a study conducted by Australian Housing and Urban Research Institute Limited, it was found that by 2011, 21% of Australians spent 30% of their household income on housing costs. In contrast, just 10% of Australians spent the same portion of their income on their house in 1982. Rising costs of ownership and utility bills means that potential first time buyers may be discouraged from purchasing their first home or house and land packages.
Lack Of Available Housing
Hand in hand with the rising cost of housing in Australia, there is also a shortage of new houses being built. This is in part to there being less suitable space for new houses to be built and also the fact that in keeping with the rest of the world, successive Australian governments at national and state level have introduced laws slowing urban expansion and aimed at preserving the natural environment. As a result, this has driven up construction costs. This means that building companies are unable to build as many houses as they could afford to in the past.
This has made competition for housing increase over time, and as a result first time buyers can be squeezed out by those who are financially better off or more experienced in the housing market.
House and land packages enable first time buyers to purchase despite the competition from others. Pottier house and land packages enable buyers to gain more land for their money’s worth.
Older generations of homeowners grew up in an age when a “job for life” working for the same company over an entire career was seen as the norm. This meant that many people were able to take their first steps on the property ladder knowing that they would always be guaranteed a steady income – and healthy pension plan – to help pay off their mortgage and their household bills.
Whilst the current unemployment rate stands at just 5.8% compared with nearly double that in the mid-1980s, the employment landscape has changed. Due to a much more competitive marketplace, job security has become more fragile and fewer people are likely to remain working for one company their entire career.
The impact of this is that without the financial benefit of a ‘safety net’, some potential first time buyers can see buying as house as much more of a gamble than their parents or grandparents did in the past.
Difficulty Getting A Mortgage
Since the global recession of 2008/2009, banks have become increasingly more reluctant to award mortgage loans to all kinds of property buyers, not just those who are looking to buy for the first time. Those who have successfully made payments over a period of time are seen as less of a gamble by the banking sector than first time buyers with little or no credit history.
The current reluctance by banks to lend money means that buyers have to pay higher deposits on their mortgages, which acts as a deterrent to people who are unable to save up the required amount.
Unfamiliarity With The Process
Aside from the financial barriers that make buying property difficult for first timers, the complexity of buying a house can be off putting for some.
One area of confusion for first-time buyers is stamp duty. Stamp duty is the tax that is put on documents that are processed during the sale of a house. This is charged at either a flat rate or is calculated on the worth of the transaction being made.
State governments are responsible for stamp duty, which is charged at different rates depending on which state you are buying the house
First home owner grants also differ in size from state to state, and it is important to know how much can be claimed as a financial leg-up to get onto the property ladder.
In spite of the hurdles that first-time buyers face, people should not be entirely put off by the process. First time buyers can thrive with the right advice and the right motivation.