02.21.2024 Buying Tips

Thinking Of Becoming A First Home Buyer In 2024?

Thinking Of Becoming A First Home Buyer In 2024?

We’re hopeful that 2024 will finally bring more first home buyers into the market.

Here’s why.

First home buyers have faced many obstacles over the past few years. Rapidly increasing property prices, rising interest rates, low supply levels and cost of living pressures have all impacted their ability to get onto the property ladder.

However, we believe first home buyers could have several reasons to be optimistic in 2024. Here’s why.

Changes to grants and schemes

Stamp duty (or transfer duty) is often the biggest upfront costs involved with buying a home other than a deposit. That means it can be a real obstacle to buying your first property.

The First Home Buyer Assistance Scheme provides a stamp duty discount or exemption to first home buyers on properties under a certain price cap. And the good news is that last year, the NSW government lifted that price cap, significantly broadening the number of properties eligible for a transfer duty exemption or concession.

As of 1 July 2023, eligible first home buyers now get a stamp duty exemption on properties under $800,000 and a concessional rate on properties valued under $1,000,000. This means if you’re an eligible first home buyer who purchases, you stand to save $30,735 in transfer duty costs.

The price cap increases bring a whole lot more eastern suburbs properties into play for first home buyers – especially those looking for an apartment – as the table below shows.

Suburb Median one-bedroom apartment value Median two-bedroom apartment value
Centennial Park $710,000 $992,500
Woollahra $820,000 $1,298,000
Paddington $710,000 $1,256,000
Bellevue Hill $775,000 $1,240,000
Potts Point $800,000 $1,438,500
Randwick $771,500 $1,157,500
Bondi Junction $820,000 $1,415,000
Rose Bay $875,000 $1,250,000
Kensington $670,000 $960,000

The First Home Buyer Assistance scheme applies regardless of whether the property is new or existing, unlike the First Home Buyer Scheme, which only applies to new builds (more on that below).

Existing schemes and grants

A variety of other government grants and schemes also offer assistance to eligible first-home buyers. These include:

  • The First Home Owner (New Homes) Grant – a $10,000 grant for first home buyers purchasing or building a brand new home worth no more than $750,000.
  • The First Home Super Saver Scheme – helps first home buyers supercharge their savings by allowing them to build their deposit inside their superannuation so they receive a potential tax break.
  • The First Home Guarantee Scheme – makes it easier to get onto the property ladder by helping first home buyers borrow 95% of a home’s value without having to pay expensive lenders mortgage insurance.
  • First Home Loan Deposit Scheme – allows first home buyers to buy a home with a deposit of as little as 5% (rather than the usual 20%) without having to spring for lenders mortgage insurance. Under the scheme, the government’s National Housing Finance and Investment Corporation (NHFIC) acts as guarantor for up to 15% of the value of the property. Income and property thresholds apply.

Lower interest rates could also help first-time buyers

It’s not only changes to government schemes that could help first-home buyers. We could also see some interest rate relief on the horizon.

Over the past two years, rising interest rates over the past two years have hit first homeowners hard. From May 2022 til early 2024, we saw the RBA’s official cash rate rise from just 0.1% to 4.35%.

Banks adjusted their interest rates accordingly, dramatically increasing the cost of servicing a mortgage and impacting the amount of money borrowers can access.

This particularly affected first home buyers, who don’t have existing equity, and are typically (but not always) buying entry level properties, with a substantial mortgage.

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With economists forecasting a fall in interest rates over 2024 (some believe the official cash rate could come down by 0.65% by year’s end), things might soon get slightly easier for first-home buyers.

The rising popularity of the bank of mum and dad

As we wrote last year, an increasing number of first home buyers are receiving help from the bank of mum and dad.

Studies show as many as 15% of borrowers tap their parents for financial help, and that parental assistance makes home ownership up to 90% more likely.

In 2024, we expect even more parents to help their children get onto the property later by making a financial contribution.

Read our article on the bank of mum and dad here.

Creative strategies

Finally, we’ve noticed more first home buyers thinking outside the box to get on the property ladder. For instance, the practice of ‘rentvesting’ is becoming more popular.

The premise for rentvesting is simple: you rent a property in your ideal suburb to live in, where you may not be able to afford to buy. Then buy and lease out a property in a neighbourhood that matches your budget, using it as an investment property.

One example we’ve seen recently is renting an apartment in Vaucluse while buying a smaller investment property in Randwick.

Done well, this can be an effective way to get a foothold in the property market. The idea is to make sure rent you are able to charge covers as much of your mortgage repayments plus other maintenance/running costs as possible.

This ‘positive gearing’ setup allows you to build equity in your investment property, which you can leverage in the future for your next property move.

We’re also seeing an increasing number of first-home buyers intending to rent out rooms from their homes. Others are pooling funds with friends and family to buy somewhere they want. If you’re thinking of doing this, we suggest you get legal advice first so that you have a plan if things break down.

Want more?

If you’re interested in buying your first property in Sydney’s Eastern suburbs, get in touch.