Apartment prices in pockets of Sydney and Melbourne are significantly lower than a year ago, creating new opportunities for first-home buyers to get a foot on the property ladder.
The federal government has also provided a boost for first-timers, confirming to this masthead that it would make a further 10,000 places available in its highly popular First Home Loan Deposit Scheme (FHLDS) from July 1.
Property prices are taking off again but some inner-city suburbs in our two largest cities have unit and apartment prices significantly lower than a year ago.Credit:Getty Images
Under the scheme, buyers can put down just a 5 per cent deposit on a property but still avoid expensive lenders’ mortgage insurance. This insurance is normally required with a deposit of less than 20 per cent and can run to tens of thousands of dollars.
While property prices are generally on the rise again, some of the best options for first timers are among inner-city Melbourne units and apartments, whose prices are normally lower than in Sydney.
However, even the harbour city has a sprinkling of suburbs where prices are lower than a year ago.
Property researcher CoreLogic has identified 11 suburbs in Sydney and 10 in Melbourne where unit prices have fallen beneath the FHLDS cap for existing properties of $700,000 (Sydney) and $600,000 (Melbourne).
For new homes, the caps are $950,000 in Sydney and $850,000 in Melbourne. There are also income tests to be eligible for the scheme.
Median values of units in inner-Melbourne have dipped by an average of $33,313 between the onset of the coronavirus pandemic and January this year, the CoreLogic figures show.
Prices in South Melbourne have fallen by up to $50,000. Other inner-city Melbourne areas where prices were above the $600,000 FHOD threshold for existing dwellings in March but have slipped below the cap by January include Brunswick, Docklands and St Kilda East.
Eliza Owen, head of research Australia at CoreLogic, says inner-Melbourne prices and rents have been among the hardest hit since the onset of COVID-19. Its an area that is highly exposed to demand from overseas migrants and international students, as well as those employed in the hard-hit tourism, hospitality and arts industries, she says.
Sydney suburbs of Arncliffe, Hurstville, Ashfield and Strathfield all have unit prices that were above the $700,000 FHLDS threshold in March last year but had fallen below the cap by January.
Since the start of the First Home Buyer Deposit Scheme a little over a year ago, 20,000 places will have been offered by the middle of this year for the purchase of existing and new homes.
The government added a further 10,000 places in November – but only for those purchasing or building a new home.
Last week, the government said it would re-issue 1800 places that were unused from first tranche of the scheme. These are available for the purchase of new or existing homes until the middle of this year.
A spokesperson for Housing Minister Michael Sukkar confirmed that an extra 10,000 places in the scheme – for new and existing properties – would be added for a further 12 months from July 1.
However, with house prices forecast to rise sharply throughout 2021, market watchers are still expecting first-home buyer activity to decline.
Andrew Wilson, consultant economist for Archistar, says the “dream run” of the past year for first-time buyers is about to come to an end.
“We have likely reached the pinnacle of affordability for first-home buyers and, as prices start to rise, fewer will enter the market,” Dr Wilson predicts.
Sally Tindall, research director at RateCity, says record-low interest rates are fuelling a boom in home lending, together with the government incentive and support packages.
There is also a fear of missing out, particularly among first-home buyers who are now seeing property prices tick up, she says.
“While first-home buyers have continued their surge onto the property scene, investors are also starting to make a comeback, adding more competition in an already crowded market where, in many locations, stock is in short supply,” she says.
The Australian Bureau of Statistics reports that while lending is still well below pre-COVID-19 levels, investors are returning, with the value of investor loans, seasonally adjusted, increasing by 8.2 per cent in December of last year.
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