First home buyer confidence is on the rise with vendors of strata residences the most likely to benefit.
A recent survey on first buyer sentiment, conducted by research group Core Data, found recent house price depreciation across Australia’s major cities was providing the impetus for more first home buyers to consider entering the Australian property market.
The Genworth First Home Buyers Survey found that while affordability remains a major barrier to entry for many first home buyers, it had also forced prospective first home buyers to alter their favoured approach when it comes to the ways in which they funded their deposit, as well as the type of property they were looking to invest in.
For the purposes of the study a Prospective First Home Buyer (Prospective FHB) was defined as someone who is looking to buy their first property in the next 24 months while a Recent First Home Buyer (Recent FHB) is defined as someone who has bought their first property in the previous 24 months.
The data showed that small apartments were progressively becoming the first property of choice for many Prospective FHBs – particularly in Sydney where more than one in three Prospective FHBs, and Melbourne where one in four Prospective FHBs were planning to buy a small apartment.
The results also showed that of the 3,000-plus respondents, almost three in four (72.4%) Prospective FHBs believe that now is a good time to buy, with more than half (51.8%) of the opinion that recent price moderation will not last.
As a result, almost three in five (59.3%) are proposing to enter the property market sooner with a less than 20% deposit.
According to the report, investment properties are also gaining popularity among this group. One in six (15.5%) Prospective FHBs responded that they are planning to enter the market by way of an investment property purchase, compared to only one in ten (10.3%) Recent FHBs.
Where once first home buyers would stay renting or living with their parents until they were able to save enough for a home deposit, it seems the tightening of lending conditions has also forced many to re-think this strategy.
The survey, which was released in August, showed almost seven in 10 (68.7%) Recent FHBs reported that they did not fund 100% of their deposit from their own savings.
Of these, the majority (56.9%) relied on parental or family assistance and more than a third (35.6%) were forced to take out Lenders Mortgage Insurance to secure their property.
According to data from property analytics group Core Logic, as at June 2019, the median price for a strata residence in Sydney was $682,374 requiring the average Prospective FHB to save for 10.6 years to acquire a 20% deposit.
The median price for a unit, apartment or townhouse in Melbourne stands at $527,748 (8.2 years), in Brisbane $372,396 and 5.8 years, and in Adelaide $322,598, requiring a prospective FHB to save for 5.4 years to accumulate a 20% deposit.