A First Time Buyers' Guide to the Sydney Market
In recent years, the Sydney property market has skyrocketed radically and has been described as one of the most remarkable booms in Sydney’s real-estate history. It’s literally the talk of the town. With no sign of it slowing down in the near future, it is becoming increasingly difficult for first-time buyers to get on the ladder. In June 2013, Sydney’s median house price was $662,500 and by September 2015, it was $900,000. Enough said.
However, director of Jacobs Buyers Advocate, Nicole Jacobs, believes is it still possible for first-time buyers to get their foot in the door. “Sydney still proves to be one of the most resilient property markets worldwide. First home buyers should not be discouraged from entering the market, utilising the low interest rates to help them,” says Jacobs. “They may need to think about buying further out, but as long as this is done understanding the key fundamentals to buying then they can still buy well.”
Scroll down for Jacobs’ first-home buyers' guide on what you need to know and what to consider to increase your chances of finding the best deal in the tough Sydney market.
It sounds simple, but it is amazing how many buyers do not have their finances in order and mortgage approved. Key to this approval is written approval from your financial institution or mortgage broker. You run the real risk of losing your deposit on a property if your loan falls through because of this. It’s also important not to stretch yourself too much or overstate your position, as this approval is almost always conditional and the lender reserves the right to change the criteria in the three months or so it is valid for.
Knowing your finance is approved allows you to set a realistic budget, and in doing so you will be able to eliminate properties that don’t fall within budget. This will save you time and allow you to keep your focus on the achievable properties.
You have your finance approved and you know your budget. Now the fun begins! Make a list of the key attributes you want your home to have. How many bedrooms must it have? Is off-street parking a deal-breaker? Is a courtyard or balcony more important than a larger internal space? Knowing your key drivers will be a time saver and will quickly let you know where you can afford to buy.
- If possible avoid main roads and train lines.
- Look for solid infrastructure nearby—shops, cafes, schools, parks, beach, transport and key roads to get to other parts of Sydney.
- Always try to opt for north-facing orientated living areas.
- Try to keep to smaller blocks. Generally, the owners corporation fees are less and they hold their value over newer, larger complexes because developers don’t build so many four and eight complexes anymore. Space is valuable so they will put as many as they can to maximise their return.
- Try and buy property with off-street parking.
- If the property needs renovating, make sure you budget the renovations into your costs especially if work needs to be done before moving in.
- Look beyond the old wallpaper and carpet. Often an inexpensive makeover (paint, new carpet, etc.) can add valuable dollars to the value of the property straight away. It may also mean other potential buyers will be put off, so don’t dismiss these opportunities.
- Street appeal often brings a buyer into a property. Think long term when you buy so that when you eventually sell or even rent this property out, a tree-lined wider street will add value once again.
- If buying off-the-plan, make sure the developer is well known for quality and know where you are buying in the block.
Knowing what you want and what you can afford, especially when you are starting out, may not always equal the same thing. Be smart. Choose your position wisely by looking for suburbs that have good infrastructure, but have not yet escalated in price to become unachievable. Fringe suburbs are a great way to identify areas where the next growth phase will occur. When popular areas become unaffordable, smart buyers look to the neighbouring suburbs.
Look for areas where retailer activity is starting to pick up. When large retailers move into areas they do so after extensive research. They have already realised this suburb has great potential for growth.
Similarly, make note of transport infrastructure like the impending South West Rail Link and the pending North West Rail Link. Infrastructure like this brings development, and hence access, to additional growth corridors where buyer activity is already building as developments get underway.
Sites like Domain should be your first step when researching. Call the agents before going to the open with a list of questions. A critical question for most first home buyers should be the internal size of the property. Obtaining finance on an apartment that is under 40sqm is almost impossible, even if you have finance approved for a certain amount, so save your time and ask before stepping out. Other good questions could be the orientation of the property. If light is a deal breaker for you, then a south-facing property that is quite dark will not suit your needs.
Once you have your short-list (or long list!) it's time to get out there and see what the properties are like. Make a list at each open and take a brochure so you can remember the key positives and negatives at the end of the day. Short-list again and go back to those properties. A second viewing is essential as it allows you to really think about how the spaces work for you, and you can pay more attention to other elements such as light, the street (go there at different times of the day to see activity and noise levels) and neighbours (often undervalued, they can be gold for information).
Leave your emotions at the door. It is difficult to be practical, especially when this is your first step into real estate. However it should be as non-emotional as possible so you can make the correct financial decision. It’s the biggest single investment you will ever make, so try and take a step back.
After viewing your short-list of properties you will know where you may need to compromise. To be in a particular suburb may require you to forgo the balcony or off-street parking. You may need to buy in a bigger block or even decide that to achieve your wish list you have to settle on a suburb that is further away from family, friends or work. When you make these decisions, think about their impact long-term. In the short-term, that additional 25 minutes in the car to work may be nothing, in the long-term it may leave you feeling exhausted and frustrated that you didn’t think about it practically.
Before you bid, and before you make an offer, you must do your due diligence. I recommend the following as a minimum:
- Get the contracts checked by a solicitor or licensed conveyancer
- Engage a licensed building and pest company to look over the property. You wouldn’t buy a car without a roadworthy would you? Think of this as an investment not a fee. It could save you thousands and ultimately it could tell you to walk away if the property is a disaster under the fresh paint and lovely furniture.
- Check owners corporation liabilities—make sure you understand your obligations under the owners corporation rules. What are the fees? Have you budgeted for these fees when purchasing? Do they have a sinking fund? Do the owners corporation minutes indicate a large expense scheduled. Eg. A new roof requiring additional money from all of the owners.
- Council—check if there are any planning applications on nearby properties that may affect the property you are looking at. This can be done online at the council website under planning, or you can call or go into council and ask.
- Measure boundaries—make sure your measurements are inline with the title measurements. If not, speak with your solicitor.
Look beyond the old carpet and wallpaper, however be aware that some properties may require a larger renovation. Renovating can be very costly in Sydney, especially if the street access is compromised, if the house is on a major slope, or you are considering not just structural changes within the existing framework, but pushing out and going up.
These costs need to be planned and budgeted roughly before you buy the property. Check with the council to make sure your ideas will more than likely pass council approval when you apply, and speak with a builder to get a rough idea of costs.
Wet areas are the most expensive with bathrooms starting at a minimum of $15,000 to $20,000, through to kitchens that can cost from $35,000 upwards.
Buying your first home should be exciting and as stress free as possible. Knowing what you want and what you can afford will save you time and money.
If you feel it is all too difficult then you should engage a licensed buyers advocate to assist in the process. Their level of service should be documented and their fees negotiable. Having someone experienced to represent your interests in such a large financial decision is invaluable.
Have you bought your first home in Sydney? If so, what would be your advice for first home buyers? Tell us in the comments below!