Domain suggests some tips for first-home buyers, upsizers and investors on how to buy a property in 2020. See the full article here.
Whether you’re a first-home buyer, an upsizer or an investor, now is the time to take advantage of the current low interest rates and easier credit standards.
Lenders are more willing to provide a loan to those with low credit risks.
If you have any blemishes in your credit history, and you’re thinking of buying property soon, now is the time to consider keeping your finances clean. Banks can now see up to 24 months of your history. This means, your credit history should be blemish-free for two years for you to easily get a loan approved.
With the market still booming, it won’t be too late to buy a property later down the track when the market prices re-balances itself. First consider your budget and finances, and considering consulting with experts for advice.
Before searching for any property to buy, it is important to make sure your pre-approved loan is ready and up-to-date.
When entering the market on a lower budget, don’t opt for a cool looking area to live. Have a look at the supply availability and take advantage of those areas with more supply. With more supply, buyers will be able to purchase for a lower price. Contrarily, for areas with low supply and high demand, people will be paying more then necessary for a property.
Alternatively, first-home buyers can consider “rentvesting”. This involves investing in an affordable market while renting in your ideal location. This is a good strategy for those looking to enter the market while saving for their dream home deposit.
For those lacking the full deposit, there are ways to get around it. The First Home Loan Deposit Scheme (FHLDS) introduced early this year allows first-home buyers to purchase a home with only 5% deposit. Although not everyone will be eligible, one will be able to test their eligibility here.
After buying your first home, many will find themselves keeping a stricter control over their budgets. But that doesn’t mean you can’t start now – before you have bought your first home. Lenders will be more inclined to approve loans if they can see good budgeting with minimal personal expenses.
For upsizers, they should first consider the costs involved in upsizing: renovation/construction costs, selling/buying agent fees, and stamp duty costs. If the costs add up to be too much, it might be a better idea to stay than upsize.
When deciding to move into a bigger home, their main priority should be to sell before buying. Rather than be stuck selling desperately after buying, upsizers will find less stress selling first. They can also take advantage of the lower prices of the upper-end of the market, as the lower-end of the market is stimulated from the FHLDS.
With the current low interest rates and positive yields, now is the best time for investors to buy an investment property.
As new homes become similarly prices to older homes due to building defects, investors can take advantage of this to have a new home as an investment property. In areas with little supply in the market, finding a long-term tenant will be much easier.
Investors shouldn’t look within only place. Investors should explore different cities and search for which ones are more affordable. Areas with greatest yield will usually be driven by infrastructure, migration, population growth and employment growth.
With banks more reluctant to approve loans for investments, investors should also ensure all bills (strata fees, water rates, council rates, etc) are paid immediately. This will ensure banks will have little reason to reject loans for your investment property.