Sunshine Coast first home buyers are turning to “the bank of mum and dad” for financial help as mortgage deposits hit $110,000 and entry level home prices crack the $550,000 mark.
Experts say that the great Aussie dream would be out of reach in the current market without the support of relatives as saving for deposits could take a decade.
As property prices continue to soar, one in three first home buyers are relying on mum and dad’s assistance, according to Finders’ First Home Buyers Report.
On the Sunshine Coast, local lenders say entry level properties are priced at about $550,000 now compared to $400,000 to $450,000 a year ago.
That equates to a 20 per cent deposit of $110,000 (without mortgage insurance) compared to $80,000 to $90,000 just 12 months ago.
However, some lenders allow a 5 per cent deposit, which brings the deposit back to $27,500 for a $550,000 home.
The Federal Government’s First Home Loan Deposit Scheme also enables a 5 per cent deposit for buying or building a new home.
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Sarah Megginson, home loans expert at Finder, said saving for a house deposit was a big financial hurdle for first home buyers.
“Prospective buyers are being stumped by a supercharged property market, which isn’t showing any signs of slowing down just yet,” Ms Megginson said.
“Low interest rates have made it cheaper to pay down a mortgage, but this has pushed up property prices, making it even harder to save for a deposit.”
She said family members were chipping in to try and make it possible.
“House prices in Australia increased by 2.8% in March alone, the fastest rate of appreciation since October 1988, so it’s not surprising to see this many parents helping their children get their foot in the door.”
Bendigo Bank Regional Manager Rohan Quirey said the entry level market on the Sunshine Coast was primarily in the sub-$550,000 price range.
He said more was expected of first home buyers now compared to a year ago, amid competition from investors.
“Prices have changed significantly as the market is running hot in this area,” he said.
“Twelve months ago, there were still plenty of options around the $400-450,000 purchase price.
“Demand from buyers, particularly property investors from outside the area and interstate, are one of the drivers in the local market and they are buying in increasing numbers.”
He said many first home buyers were turning to their parents for assistance.
“We are seeing a combination of assistance from family members, genuine savings, and sale of assets to assist them to get into the market, while the First Home Loan Deposit Scheme is in place.
“Before the scheme, buyers who had for example a 5% deposit, were holding off purchasing and continuing to save.
“The scheme has brought these people into the market earlier and this is certainly one of the drivers to entry level properties on the Sunshine Coast and surrounds.
“Of course, Lenders Mortgage Insurance (LMI) is also an option for those purchasers who are seeking to enter the market, but don’t necessarily have the required deposit.
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Mr Quirey said the FHLDS opened doors for some.
“Buyers can build or purchase a newly-constructed property with as little as a 5% deposit.”
“Based on a $550,000 purchase price, a buyer would be up for around $27,500 for a deposit, plus legal costs on top of that.
“The average mortgage application we are seeing is between $400-500,000 in this market, depending upon the location of the property”.
Bank of Queensland Maroochydore owner/manager Nicholas Barker said buying a home was often the most significant financial commitment a person would make.
“Everyone’s journey to home ownership is different,” he said.
“Some first home buyers will be able to draw on support from family and friends, whether in the form of a contribution to their deposit or a guarantee of their loan. Others won’t have that option.”
He said aspiring homeowners should start saving early by sticking to a budget. They should also get clarity on how much they can borrow, how much deposit they will need and what their ongoing repayments are.
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Leading Sunshine Coast auctioneer and sunshinecoastnews.com.au columnist Gordon Macdonald believed many first home buyers, particularly of properties worth around $600,000, were getting family assistance.
He said the ‘railway towns’, including Beerwah, Glasshouse, Woombye, Palmwoods and Yandina, were good places to look for better value homes.
“It’s an amazing growth corridor,” he said.
“It gives you the opportunity to commute into the city easily and you are purchasing bigger blocks of land.
“Bigger blocks will have better appreciation.”
He said established homes could represent better value.
“A first home buyer needs to be prepared to live in an older home but get better land,” he said.
“Many first home buyers want to live in a brand-new home, but bigger land is a better investment.”
He said many first home buyers were attending auctions and bidding between $600,000 to $700,000.
Financial tips for first home buyers
Via Bendigo Bank and Bank of Queensland
- Put in place a savings budget and stick to it so you can enter the market with as much deposit as possible.
- Reduce other borrowings and lines of credit. Reduce or pay out other debt if you can, like car loans which have a shorter loan term and higher repayments, as these loans affect borrowing power.
- Plan for the future with your borrowing capacity, not just for now, and keep to your purchase budget.
- Once you have landed your property and moved in, accelerate repayments early on if you can.
- Take the time to understand all of the costs involved in purchasing a property. This includes upfront costs, such as Stamp Duty and/or legal fees, as well as ongoing costs like council rates, utilities and body corporate fees.
- Look into any government assistance you may be entitled to, such as the First Home Owners Grant.
