‘Gone are the days of big properties and even bigger mortgages’
First-time home buyer activity is at its lowest level in years, despite declining home prices, as rising loan rates and the fear of overpaying discourage hopeful home owners.
Michelle May, the principal of Michelle May Buyers Agents, acknowledges that even though falling home prices seem like good news for first-time buyers, they aren’t much help when their ability to borrow money is falling faster and three-bedroom family homes are still hard to find.
She has highlighted that while regional and capital cities both saw a drop in the CoreLogic Home Value Index for the fourth month in a row, home prices have still stayed above pre-COVID levels.
While this is due to a number of factors, there are several trends the buyer’s agent is paying particular attention to.
One such reason is the fact that a number of employers are now encouraging their workforce to come to the office two or three times a week, which is helping keep city real estate markets strong.
Due to the low number of three-bedroom family homes in city locations and the higher prices that come with them, this will keep stable value levels because there are many buyers who want to be closer to work and settle down.
The shortage of suitable properties is also being exacerbated by the fact that the older generations that own these homes have few options for downsizing. They typically desire a permanent, low-maintenance home but can’t find one in the areas they wish to reside.
Ms May hopes that the First Home Buyer Choice initiative, which starts in January and helps first-time buyers in NSW, may assist with this.
It’s a different story in the realm of one- and two-bedroom homes. Ms May flagged that many new buildings are designed to meet the profit needs of developers rather than the needs of buyers, which is why there is an oversupply of one- and two-bedroom flats rather than the well-planned three-bedrooms that this generation of buyers desires.
This has meant that as the rental crisis gets worse, investors are coming back. According to the buyer’s agent, even though yields are low, growing demand for rental properties and a severe lack of supply in some places could result in higher returns.
Elsewhere, Ms May concedes that small and medium-sized building companies and people who flip houses for a living are having a hard time because the cost of raw materials has gone through the roof and there aren’t enough skilled tradespeople. This has caused many projects to go over budget.
That, in turn, is causing many home owners and would-be purchasers to change their property plans.
With buyers’ priorities and budgets going through a huge change that will affect the consumer real estate market for a long time, Ms May acknowledges that wants and needs have gone through a huge overhaul.
Even so, “the demand for homes will always be there”, she said.
