Finding the right property can be a little tricky, particularly if you’re buying your first home.
Here are some expert tips and suggestions that, if you heed them, are going to make searching for the right property far less complicated.
And, that, in turn, will make buying your first home a memorable experience.
Tip 1: Are you familiar with the property types?
If you are buying your first home, you should get intimately familiar with different types of properties.
Generally, properties are classified as:
- House: Single, detached, free-standing houses
- Unit: Apartment that typically has strata title and is attached to other apartments.
- Townhouse: Semi-detached home sharing a common wall with the house next to it.
- Vacant Land: Empty land with no permanent buildings.
Each property type comes with its own distinct advantages and disadvantages that you should consider while looking for your first home. Please check out our full list of property types for more information.
Tip 2: Does the property meet your needs?
Ideally, your first home should match your lifestyle. But keep your options open because you would also want it to fit the bill.
So you should probably consider these:
- Size of your family: Are you single, living alone or with a partner? Are you married already or planning to? Do you have kids or dependants living with you? Do you have pets? The answers to these questions will determine how big or small you want your future home to be.
- Size of the property: Besides your family, several other things also dictate the size of your property. For instance, do you want to have a hobby farm or a swimming pool? Do you need private parking and driveway? And for how many vehicles?
- Size of your wallet: You may not be looking to buy your first home upfront. Very few people do. But you do need to do your maths to figure out if your borrowing power is sufficient enough for the property you are looking to buy. Account for your deposit, loan amount, living expenses, income and mortgage rates available to know how much money you can comfortably borrow.
- Time commuting to and from work: Typically, you would want to live closer to your work so that you don’t spend hours commuting to and from work. It’s both efficient and less stressful to buy your first home within a reasonable distance from where you work.
- Proximity to public transport, recreation and other amenities: When researching the right property, you may also want to consider the closeness to amenities like public transport, recreation centres, restaurants and pubs, schools and universities, and shopping centres. It goes a long way into making your life that much more convenient.
Tip 3: How to research the property market?
We live in a digital age so the internet has all the resources that a first home buyer needs, although finding factually accurate and up-to-date information may be a challenge.
What you can do is come up with a checklist of what you want in your first home. Consider your budget, your preferred location, property size and type, current housing prices and other relevant things to narrow your search criteria on the internet.
You may also want to open houses to get a feel of the local property market, know the neighborhood better and also to get the idea of what you need to look for while trying to find the right property.
Tip 4: How to pick the best suburbs?
While some first home buyers may prefer to live much closer, if not within, cities, the rest may very well prefer to live in quieter suburbs outside the city.
What you need to understand here is that dwelling prices largely depend on housing demand and supply. In cities, population density and job growth are both high, and property listings are usually lower than the number of people looking to buy them. So, property prices there are usually high.
Contrary to that, the housing supply, in outer suburbs, is typically on par with housing demand, if not more, keeping the prices in check.
So, if affordability is your key concern, like for many first home owners, you might want to move into outer suburbs where the property prices are affordable. Remember that a house in the city will cost less than a house of a similar size in quieter suburbs.
Compare Hurstville and Bondi, for instance. The average price for a 4-bedroom house in Hurstville is around $1.25m, whereas in bustling Bondi, a house of similar size will cost around $2.95m on average.
Interestingly, what you will pay for your first 3-bedroom house in an outer suburb may actually be enough for you to afford a single bedroom unit in the city. The median price of a 4-bedroom house in Hurstville is, for example, almost the same as the median price of a 3-bedroom unit in Bondi, which is around $1.25m.
That is to say, the size of your first home may also be one of the things you need to consider, besides the location.
| Hurstville (21.8km from the city) | Size of the dwelling | Bondi (6.6km from the city) | ||
|---|---|---|---|---|
| Median house prices | Median unit prices | Median house prices | Median unit prices | |
| $935k | $665k | 2-beds | N/A | $1.115m |
| $1.069m | $789k | 3-beds | $2.4m | $1.25m |
| $1.263m | N/A | 4-beds | $2.95m | N/A |
* Property prices are accurate as of 12 February, 2020.
Tip 5: How to choose between unit vs house?
When deciding between a unit and a house, it helps to know their pros and cons so that you can, with that information, find the right property type for yourself.
What are the pros and cons of living in a unit?
| Pros of living in a unit | Cons of living in a unit |
|---|---|
| A unit is typically less expensive than a house in the same location. So, units make for an ideal residential choice, if affordability and city-life are what you are aiming for. | A unit is usually smaller compared to a house. That is to say you will have less space to live in, if you have a bigger family, and virtually no outdoor space for gardening or a private garage. |
| A unit inside an apartment complex is also more secure than a detached house due to access cards or keys and dedicated security services. | Since apartment complexes are managed by a strata company, you will have to keep paying strata fees regularly, which can add up to a lot by the end of the year. |
| A unit needs less time and money for maintenance compared to a house. You are only responsible for the upkeep of your own apartment and strata management takes care of the rest of the building and common properties. | Strata bylaws may also prevent you from doing many things you may like. For instance, you may not be allowed to keep a pet or significantly upgrade your apartment. |
| When you buy a unit in an apartment complex, you may also get access to common areas and shared facilities like swimming pools, gym or barbecues. | Living in a unit may also affect your privacy with so many people living closer to each other. |
What are the pros and cons of living in a house?
| Pros of living in a hosue | Cons of living in a house |
|---|---|
| A house is normally bigger than a unit in size and, thus, comes with ample space for living as well as recreational use for bigger families. | A house is generally more expensive than a unit. So paying for an apartment may be more feasible for some first home buyers as opposed to buying a house. |
| A house may have an outdoor space for private parking or a backyard for children to play or grow a hobby garden. | Since you completely own your house, the cost of maintenance and upkeep is also your sole responsibility. |
| A house also gives you a complete freedom to upgrade or extend. You can even demolish and rebuild a new house, if you so please. | When it comes to heating, cooling and lighting, a house also consumes more power than a unit and that adds to your ongoing expenses. |
| The land on which your house stands can add a significant value to your entire property, which is something highly bankable during hard times. | A house typically involves paying for regular council rates and land tax that can add up to a significant amount depending on the size and location of your house. |
Tip 6: How about a townhouse?
Attached to neighboring properties, townhouses offer a more spacious interior than units and also a private entrance. Some may even come with their own backyards.
Due to their compact size, these properties are more affordable than houses, in terms of purchasing price and cost of maintenance.
But, like apartments, these properties also involve paying for strata fees and abiding by the body corporate bylaws that may restrict renovations and extensions.
Tip 7: Why not buy a fixer-upper instead?
A quick way to home-ownership for first home buyers is acquiring a fixer-upper — a house that needs some renovation.
Since it’s not in good shape, you can buy it for less than what a turnkey house of the same size costs. You can take time, afterwards, bringing it up to your living standards. And, if you’re on a budget, you can always wait till the fund becomes available.
You can also cut costs on repairs and paint jobs by hiring a local handyman. If you know the craft yourself, that’s even better.
By doing your own renovation, you will ultimately save money because there’s nobody making profits off of it. And, you’ll also add more value to your first property than when you bought it.
When to buy a fixer-upper?
- If you’re on a budget but still want to buy a large home.
- If you are quite sure you can manage the cost of renovations.
- If the house needs small renovation and minor improvements that require a handyman or two to fix.
- If you’re thinking of moving into an even larger house in the near future and want to sell your first home to raise enough capital for your second house.
When not to buy a fixer-upper?
- If it needs major remodelling or restructuring that requires a professional company to fix.
- If you think you can’t handle renovations yourself.
- If you’re not comfortable with the idea of moving into a house that’s not new.
Tip 8: Are there any first home packages in the market?
If you are actually looking into buying a brand-new first home, there are two ways you could go about it.
- Buying off-the-plan
- Going for a house and land package
What’s buying off-the-plan?
When you sign a contract to buy a house or an apartment based only on its construction plan before it has been built, you’re buying off-the-plan.
Usually, you pay a 10% deposit for this package and pay the rest of the property value after it’s built. That also means, when you buy off-the-plan house, you don’t own the land until the completion of property.
Since you cannot inspect the property physically, you have to make an informed decision based on its blueprints and designs, and the reputation of the property developer.
What are the benefits and risks of buying off-the-plan?
| Benefits of buying off-the-plan | Risks of buying off-the-plan |
|---|---|
| You lock the final purchase price well before the property is completed, but contribute only a small amount of deposit initially, which allows you more time to save up for the final payment. | If the market slows down during the construction of your home, your property price may be undervalued by the time it’s built. That means you will end up paying a lot more for your home than it’s worth in the market. |
| There’s a good chance that you will save on the purchase price because property values typically grow by the time your developer finishes building your home. | If you haven’t completely checked out the background of your developer, there is a risk that your home may have structural defects once completed. |
| First home buyers can borrow up to 95% of the property value (with some limitations) or up to 105% with a guarantor. | You may also be left partly unsatisfied with the final home design since you didn’t get to inspect it physically before signing your off-the-plan contract. |
| First home buyers are also entitled to stamp duty discounts in some states. The exact amount may differ from state to state. | Several factors can extend the timeline of the construction causing unexpected delays. There is a safety-net called sunset clause in this kind of contract but you might want a conveyancer or a lawyer’s counselling here. |
| A brand new home requires little maintenance during the first few years so you can save some money there and instead channel it into your repayments. | Your property developer could go bust and fail to complete your home. If that happens, you will certainly end up losing all your deposit. |
What’s a house and land package?
When you buy a house and land package, you first settle on the land then hire a licenced builder to start the construction of your house.
Unlike off-the-plan properties, a house and land package involves taking out two different loans. One is a vacant land loan for the purchase of the land and the other is a construction loan to build your house.
You pay for the land by taking out a standard mortgage whereas the construction loan requires you to withdraw payments in several stages to pay for the construction. Doing this can actually save you a lot in the interest payments, since you’re not using the entire funds available.
What are the benefits and risks of a house and land package?
| Benefits of a house and land package | Risks of a house and land package |
|---|---|
| You have full control over the design and quality of your house since you are hiring your own builder. | Availability of inexpensive land can be a problem since most of the vacant lands are located on the outer suburbs. So, if you want to find land in urban areas, it might be difficult as well as more expensive due to its short supply. |
| The price is usually clear upfront, which is a lot safer way to go about building a house than off-the-plan properties. The changes in the market won’t make much difference when the construction is complete. | The cost of construction can also be an issue if a builder adds a lot of profit margin into it. |
| You will save a lot on interest payments since you are making construction payments on installments. In other words, you only pay interest on the amount of money you are actually using. | Sometimes the quality of the final construction may not meet your expectation or the whole construction process might be delayed for many reasons. |
| You will also end up saving a fortune on stamp duty payments since it only applies to the land value and not the entire house, and typically you also get concessions. |
Pro-tip: What kind of properties do lenders prefer?
Even if you have your pre-approval, sometimes the banks or the lenders may not accept certain properties for securing home loans.
So it is often better to know in advance just what banks prefer prior to deciding on purchasing the next best property you find in the market.
Generally, banks and lenders prefer properties that fit these criteria:
- Larger than 50m²: The internal floor space of your home must be bigger than 50m²; otherwise, most lenders will decline your loan application.
- Must be in a sound condition: The lenders also hesitate to offer mortgages for the properties that are not in a good shape. It could be pests, structural problems, or in need of major remodelling.
- Must be in a good location: Places with high crime rates, high unemployment, or greater credit risk are less preferred by banks and other lenders. They may also decline properties in areas that are more vulnerable to natural disasters, places reliant on a single economy, or those that fall within heritage sites or rural areas.
- Has to have views: High-rise apartments and units without much view are also less preferred by most banks.
For more information on the kind of properties that are acceptable and unacceptable to banks, please refer to our page on choosing units vs houses.
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Disclaimer: The information provided on this page is intended for informational use only and not to be considered any form of financial advice. You should consult a financial planner or an accountant to come up with an informed decision before acting on any piece of information found in this page.