Good Time for First Home Buyers, Says RBA
Low interest rates, government incentives and predicted positive economic growth make it a “good time for first home buyers”, according to the Reserve Bank of Australia (RBA) Governor, Philip Lowe. However, when it comes to buying your first home, there are several factors you should consider before leaping into home ownership.
We’ve broken down the pros and cons of the above three factors so first home buyers can better understand how these elements can help or hinder them when purchasing property.
PREDICTED POSITIVE ECONOMIC GROWTH
Pros: Low-infection rates and the prospect of a COVID-19 vaccine coming soon are just two factors influencing Australia’s economic recovery. While Australia emerges from a recession, Lowe, RBA Governor says: “Economic recovery is under way and recent data [has] generally been better than expected. Financial conditions remain accommodative around the world, with bond yields near historically low levels. The improvement in risk sentiment has also been associated with a depreciation of the US dollar and an appreciation of the Australian dollar.” However, Lowe says economic growth and recovery is likely to be “uneven and drawn out”, and will be largely dependent on monetary and fiscal policies.
Cons: Despite predictions of positive economic growth, Australia’s unemployment rate still remains a concern for some first home buyers. While employment growth has increased over the last few months, under and unemployment is predicted to rise as businesses restructure in the wake of COVID-19. Moreover, 900,000 businesses are still reliant on the Federal Government’s JobKeeper wage subsidy program, with Treasurer Josh Frydenberg predicting ‘some businesses will not survive’ at all once the program ceases at its currently legislated end date of March 28, 2021. In light of this, Dr Lowe suggests it’s a good time for first home buyers with “income security” to buy.
LOW INTEREST RATES
Pros: The official cash rate, which currently sits at a historic low of 0.1 per cent, means it’s never been cheaper for first home buyers to access home finance. In fact, interest rates are so impressive that in some regions of Queensland, home repayments are cheaper than rental prices. Rebecca Herbst, Sales Manager at Bees Nees says favourable financial conditions have made it the perfect time for potential first home buyers sitting on the fence to take action and buy now. “Interest rates are still low, and prices have been stable,” says Herbst. “However, we are seeing signs of the market price increasing, so [first home buyers] are best to get in now.”
Before taking advantage of low interest rates, buyers should ensure the rate cut is wholly passed on by their lender of choice. The following table produced by Canstar shows the latest rate statistics.
Cons: Low interest rates spell mostly good news for first home buyers, but there is a negative that most discount the impact on savings. For obvious reasons, lower interest rates = less rewards passed on from the banks for saving, which in turn can slow down first home buyers trying to save for their house deposit, or even deter them from saving at all.
Pros: First home buyers in Queensland are eligible for an array of grants, such as the Queensland First Home Owners Grant, Regional Home Building Boost Grant, the Federal Government’s HomeBuilder Grant, the First Home Super Saver Scheme and the First Home Loan Deposit Scheme. The benefits of these schemes do vary, but all have a common goal: to get first home owners onto the property ladder sooner.
Justin Marsden, McGrath Queensland State Manager said the variety of schemes available have seen an influx of first home buyers coming to the market. “We have seen a rise in first home buyers since HomeBuilder was announced,” says Marsden. “HomeBuilder, along with the First Home Owners Grant certainly give first home buyers significant reasons to get into home ownership now. A number of land releases that qualify for the above have been sold out in record time.”
Cons: While purchasing your first home has been made easier thanks to State and Federal incentive schemes, support measures currently do not extend further than construction and new housing. To ensure the long-term stability of Queensland’s property market and to allow first home buyers to get their foot on the property ladder sooner, the REIQ is calling on stimulus measures to be applicable to established housing.
REIQ CEO, Antonia Mercorella says: “Any stimulus measures for the property market must support the whole of real estate for the benefit of all Queenslanders, which includes providing access and choice in established housing. By doing so, it will help drive consumer confidence upward, accelerate our economy and increase the labour market across both construction and real estate, two of Queensland’s largest industry employers.”
Important disclaimer: This article is provided for general information only, and the author is not engaged to render professional financial advice or services through this article. Readers should satisfy themselves as to the correctness, relevance, and applicability of any of the above content, and should not act on any of it in respect of any specific purchase, investment, or other financial activity without first obtaining their own independent professional financial advice.