Buying Your First Home or Investment Property? Top 5 Australian Housing Market Trends to Watch Out For

Jayde Ferguson

Buying your first home or investment property is meant to be one of the most compelling times of your life – and without a doubt it is. It’s a rollercoaster of emotions from stressful decisions to an overwhelming feeling of accomplishment with you’ve finally made that dream a reality. 

For many first home buyers though, it can be a hectic and confusing time. Property investment can be tricky, but the rewards are exceptional for getting it right.With an Australian housing market worth $4 trillion, according to a report from the Sydney Morning Herald, it’s become even more crucial for first home buyers to be on the ball with the market. We delve into the latest trends you should be watching out for to ensure you have the best advantage when buying and investing.

1. The New Home Building Boom

There has been a significant shift in the construction of homes with recent figures revealing new home building is at its best growth in four years. In previous years the renovation craze was evident, undoubtedly sparked by reality television shows such as The Block, House Rules and Renovation Realities. Since June however ABS statistics reveal that home makeovers have dropped.

This boom is a bonus for first home buyers, who were pushed out of the market for an extended period by competing investors, high-money roller and international buyers. As qualified first home buyers don’t have to worry about stamp duty when building from scratch, the advantage of the new home building boom allows for a solid choice of homes and communities throughout the Australia housing market.

The latest increases in the new home building market are up 9.6% this year, and there’s no indication of it slowly down anytime soon. It’s not unusual however, for first home buyers to shy away from building their first home thinking the process may be too hard.  With the savings on stamp duty as a motivation combined with this recent boom, it can be the perfect opportunity for a smart investment.

2. Smart Property Investment – Top Australian Suburbs 

The 2014 report created by Smart Property Investment focuses on the nation’s top locations, whether for your first investment or first home to buy. Last year, Queensland was listed as the top performing state and affordable housing is still a prominent feature for 2014 with 13 locations listed. Top suburbs for Queensland include Cairns, Broadbeach, Townsville, Kingston and West End, just to name a few.

NSW has grown to be a perfect location for investment with the road and rail enhancements well under way, listing 21 top ‘hot spot’ suburbs. North Rocks is popular and very affordable and Newtown, Blacktown, Rouse Hill and Merrylands are also ideal.  Western Australia tipped among the nation’s investment ‘hot spots’ too and lists 10 top suburbs to live in. Armadale has been selected high on the chart thanks to the growth of large infrastructure projects underway and has been boosted by its affordability, scenery and easy to reach location. Other suburbs that made the list were Highgate, Joondanna, Kwinana, Wellard and Sorrento, all offering significant redevelopment potential and good transport links.

Victoria and South Australia just made the cut with 4 and 2 suburbs. Both states offered substantial growth in employment prospects with housing prices remaining solid. Baxter, Sunshine, Brimbank and Sunbury were named the top ‘hot spots’ for Victoria, with Aldinga Beach and Renella backing South Australia. All suburbs listed in the report were selected based on metrics including housing demand, previous capital growth, household income, and employment and vacancy rates.

3. Don’t be fooled by Low Interest Rates

As a first home owner, low interest rates create a sense of excitement and opportunity. They do sound pretty good don’t they? Well, they still are but you can’t always be drawn to the prize based on them. For the average Australian, affordability seems to be a huge problem and because interest rates are so unpredictable it’s important you take them into consideration when budgeting for a home.

In a market that claims Australian housing has never been more affordable, record low interest rates imply that servicing a mortgage is easy – but how long will these rates stay so low? Keep in mind, that when you take out a loan for your mortgage it’s typically taken out for 20 – 30 years. Being influenced by interest rates today is a mistake because these will fluctuate over the next few decades while you’re still required to make payments.

Below the chart identifies how much interest rates have spiked in Australia in the last 30 years. As you can see, there’s a big difference. Low interest rates are definitely helpful for first home buyers, but being aware of how much this can change in your loan time frame will keep you prepared.

4. First Home vs. First Investment Property – What’s Better?

Looking into property for the first time can be daunting. There’s questions buzzing around in the back of your mind and weighing up the pros and cons for everything can get pretty confusing. Years ago, it wasn’t a common practice for people to invest in property before buying their own home but in today’s market it’s a trend that’s boomed with people doing it all the time.

So what do you choose? For a first home buyer the benefits of grants, not needing to pay stamp duty and of course, the advantage of living in the home of your dreams is enticing. How can it not be? Unfortunately these don’t all come with investment properties though. Whilst it’s possible to get around this by buying a home, living in it for a year then renting it out, there’s a fine line between what you can get away with and what you can’t. Thus, it’s important if you do go down this track, you don’t bend the rules and actually live in the property for the time required.

Depending on your income, and whether you’re splitting the costs of a home with your partner, you may not always be eligible to borrow the money you need for your home. In these situations, purchasing a home as an investment property can be beneficial as you will the help from tenants to make the payments.  With a rental market however that is so expensive, it can be much more cost-effective to be paying off your own mortgage than someone else’s – and there’s no better feeling than living in the home you’ve created for yourself.  

5. Keeping Ahead of the Game – What to Look Out For

The real estate industry is renowned for going in circles so it’s vital you keep up to date with the market.  As a first home buyer or investor, it’s imperative you understand your investment goals and create a solid road map to build your wealth or house of dreams in the Australian property market.

The Australian property market offers first home buyers a wealth of opportunity, but be weary that not all locations and homes are the same.  To know what to look out for in up and coming ‘hot spots’, you need to identify your desired location and visit as many properties as possible before you even consider buying. This will give you a strong idea on what you get for your money and an understanding of the current trends.

Author Bio

This article is written by Jayde Ferguson, who writes for Riverstone Builders - Perth’s finest luxury home builders–  build your luxurious home or investment property in one of WA's top suburbs! You can catch her on Google+.