5 tips to ensure your first home is a good buy

Following the Morrison Government’s announcement of a deposit scheme for first home buyers, prospective purchasers will be moving quickly to get on the property ladder.

So, how can first-timers be best prepared for this opportunity, and what should they be looking for?

Set to launch on January 1 2020, the $500 million First Home Loan Deposit Scheme will provide loan guarantees of up to 15% of a property’s value to first home buyers earning up to $125,000 and couples earning up to $200,000.

However, it will be capped at 10,000 borrowers each year, meaning competition will be stiff.

Frank Valentic, a buyer’s advocate and director of Advantage Property in Melbourne, says “there’s never been a better time to look for an entry-level home” and first home buyers should have a clear idea of what they can afford, and what will offer growth potential.

11/3 Ellesmere Road in Windsor is an “affordable real estate opportunity” for first home buyers. Picture: realestate.com.au

As an example, he points to 11/3 Ellesmere Road, Windsor as “an affordable real estate opportunity” for first-time buyers in Melbourne. The two-bedroom apartment, in an older-style block of only 10 apartments, is currently on the market for $489,000.

“It pays to buy under a suburb’s median price; the median unit price is $520,000 in Windsor. It’s also a bonus to buy a two-bedroom unit as it has better resale value and higher demand and growth prospects,” Valentic says.

He also suggests first home buyers should look at price points beneath the median sale price in their market, which in Melbourne is $793,000 for a house and $587,000 for a unit.

Here are Valentic’s top five tips to make a good first buy in the property market.

1. Look for high-demand suburbs

Valentic says it’s always a good idea to search by the old adage of ‘location, location, location’, which for entry-level buyers would likely mean a unit in an inner-city suburb, or a house in an up-and-coming area a little further out.

He says the two-bedroom apartment in Windsor is a solid prospect for growth and future demand from buyers as it’s in an established area with plenty of amenities and easy access to the CBD.

2. Consider the ugly duckling

Buying a dwelling that needs a little work means potential for improving the overall value, Valentic says.

“Wet areas, particularly the kitchen and bathroom, are great areas to add value with updates such as new tiling and modern fixtures and fittings,” he says.

“Considering the ‘ugly duckling’ means you may be able to add value and the competition might be less fierce.”

Read more: What does the First Home Loan Deposit Scheme mean for buyers?

3. Buy within your means

While it can be tempting to get carried away during the property search, Valentic stresses the need to not overextend yourself with a home loan.

“It’s important to borrow within your means and future-proof your mortgage,” he says. This means leaving a buffer for a change in circumstances, such as interest rates rises or loss or variation of income.

Windsor is a popular inner Melbourne suburb with a median unit price of $520,000. Picture: realestate.com.au/buy

4. Consider an outdoor area

Another element that’ll affect resale value is the presence of an outdoor area, Valentic says.

“This could be a courtyard, a balcony, or a small backyard in a house in the outer suburbs.”

5. Check for structural defects

Last but not least, be sure you’re not buying a ‘lemon’ by getting the tick of approval on the building’s structure.

“I always recommend a pre-purchase building inspection to check all major structural items and make sure the property is solid,” he says.

“If it’s a unit, contact the owners’ corporation to make sure there are no major problems with the building or any pending works.”

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