There hasn’t been a better time to buy a home in Canberra in 15 years. With record low interest rates and the current affordability of home loans, you would think more and more first home buyers would be flocking to the market. But there have been several reports which reveal first home buyer numbers are actually down.
So what is preventing new buyers from entering the market? Well, it might be surprising to hear, but it could actually be due to the way the first home buyer grant is currently applied.
On the 1st of September last year the value of the grant rose from $7,000 to $12,500, however it was also restricted to purchases of new and substantially renovated properties. The idea was to create opportunities for First Home Buyers and stimulate the local building industry, by encouraging them to purchase new homes off the plan.
Before the grant changed, only about 20% of First Home Buyers were buying properties off the plan, which means the new system essentially forced 80% of this important buying demographic to re-evaluate the kind of property they wanted to buy.
In the last financial year, 47% of our off the plan sales were made to First Home Buyers. Of course, this is not just due to the grant. The convenient town centre locations, lifestyle benefits and amenities these buildings offer had a significant part to play in these figures.
And while it’s great to see such a large number of new buyers entering the real estate market (especially during a period when First Home Buyers represent less than 20% of property purchases nationwide), you have to wonder how many are either choosing not to enter the market because they can’t find a suitable property or are having to compromise on what they really want.
There’s a large proportion of first home buyers who have enough money for a deposit and would prefer to buy an home they can move into straight away, rather than having to wait 2 or 3 years for it to be built. Normally, they would buy an established property, but the unbalanced market the grant has produced has made new properties much more attractive.
Here’s the thing though, an unbalanced market impacts everyone. This isn’t just a problem for first home buyers. There are plenty of homeowners who are looking to upgrade and sell the entry level homes they are living in now (homes that would appeal to first home buyers), but because the grant has artificially changed the market for these properties, it’s harder for them to sell – which makes it harder for them to buy that newer, larger apartment or townhouse they’ve had their eye on. This in turn makes it harder for developers building those apartments, and this flow on effect keeps going, impacting all levels of the market.
Ideally, we should be looking for a way to increase accessibility for First Home Buyers that helps to create a fair and balanced market. A few tweaks to the way the current grant works would be all that is needed for everyone in Canberra to benefit.