‘It’s a catch-22’: Some first-home buyers ready to pounce as prices dip

Two recent research reports conducted by ING and Gateway Bank paint very different pictures of the first-home buyer market, in a sign that the pandemic has divided the market into separate camps based on job security.

While some first-home buyers are making their move and purchasing a property, others with seemingly more precarious employment have shelved plans to purchase for a couple of years.

The ING report reveals that almost half (46 per cent) of Australian Millennial home buyers say the COVID-19 pandemic has made home ownership more achievable, and a third (32 per cent) say they’ll buy a home in the next one to two years.

Those surveyed are taking advantage of lockdowns to save even more, diverting funds intended for travel into home savings accounts (59 per cent), taking on a side hustle (37 per cent) or moving back in with their parents (36 per cent) to save.

Other forced savings have included a drop in personal shopping (48 per cent), cutting dining out experiences (42 per cent) and recreational drinking (28 per cent), giving up gym memberships (21 per cent) and saving cash by dating less (24 per cent).

Head of home loans for ING Julie-Anne Bosich says the research, conducted in June, suggests that Millennials haven’t given up on the great Australian dream of owning their own home.

“It suggests many people, especially Millennials, are being savvy by taking advantage of record low interest rates, government assistance and a weakened housing market to get on the property ladder.”

Abandoning the dream

However, the second report by Gateway Bank paints a very different picture, finding that nearly half (45 per cent) of first-home buyers have been forced to dip into their savings during the COVID-19 crisis to cover day-to-day living expenses.

More than half (56 per cent) of those surveyed admit that the pandemic has proven a big setback, with one in four (25 per cent) expecting to be saving for at least an additional three more years.

Lexi Airey, chief executive officer of Gateway Bank, says two thirds of first-home buyers have been forced to delay or abandon plans to purchase a property altogether.

“The pandemic has had an undeniable impact on many Australians’ financial position. Because of those setbacks, we’re seeing first-home buyers become even more proactive in managing their finances to ensure they can be in a position to purchase a home as soon as possible,” Airey says.

Meanwhile, others are scrambling to access government schemes in a bid to circumnavigate the need for a 20 per cent deposit. Blocks that have been sitting on the market for up to two years are selling to first-home buyers keen to access the HomeBuilder grant.

“For those who haven’t been affected by the pandemic, there is a potential opportunity to fast-track their home ownership plans and take advantage of market conditions that may favour first-home buyers,” she says.

Making the leap

Chief economist for PRD Real Estate Diaswati Mardiasmo says first-home buyers who are financially stable have seized their opportunity to enter the market.

“Many brokers are reporting a flurry of first-home buyer activity, with first-home buyers making up to 21 per cent of loans lodged in June, up from 12 per cent in April,” Dr Mardiasmo says.

While the economy is starting to recover, retail spending has experienced a slight increase and with plans in place to deal with the COVID-19 spike in Melbourne, there are hopes that confidence will build, she says.

“It’s a catch-22 – on one hand there are a number of factors working for first-home buyers, such as stimulus packages, grants, low cash rate and property prices softening. But on the other hand there’s economic uncertainty and the possibility of job loss,” she says.

Deloitte economist Nicki Hutley says the pandemic has created the perfect opportunity to save more as lockdowns force a reduction in spending.

“Clearly a lot of people are out of work, but on the other hand, there are large pockets of the market that feel comfortable in their job and feel ready to make the leap into their first property,” Hutley says.

“My view is that it’s impossible to perfectly time the housing market. The biggest decision for many first-home buyers is weighing up job security and whether they can afford the repayments in this time of greater economic uncertainty.”