Thousands of first home buyers in Australia, a lot of which are migrants, are caught in a dilemma -- whether to buy now or postpone their plan to early 2020 – when a promise is expected to become a reality.
Prompted by an election promise made by Prime Minister Scott Morrison days before the May 18 election, the Liberal Party had made an election promise on May 12 that if re-elected, it will help first home buyers realise their dream with just a 5 per cent deposit, as compared to the current requirement of 10 or 20 per cent. The scheme is expected to be rolled out in January 2020 and applies to the purchase of a first home for individuals with an annual income of upto $125,000 or couples with $200,000.
Buoyed by this announcement aimed at increasing housing affordability, many first home aspirants – a lot of them migrants – have postponed their plans till 2020.
Meanwhile, the real estate market has started showing signs of an upward trend since the election results were declared on May 18, with weekly property clearance rates jumping from around 50 per cent in May to over 70 per cent in June.
While planning a real estate purchase, the first preparation that one has to do is arrange finance. The ability to arrange finance is determined by the interest rates lenders, like banks, offer. The current scenario around interest rates appears to be encouraging people to buy their first house.
After bringing down the interest rate to 1.25 per cent last month, the Reserve Bank of Australia (RBA) announced a further cut on July 2, bringing the interest rates to just 1 per cent -- the lowest in the history of Australia.
What could this possibly mean for those who aspire to buy property, especially a first home?
To lay it out for easy understanding, SBS Punjabi spoke with several stakeholders of the Australian property dream: buyers, property agents and mortgage brokers.
Rashmi Mehra, a resident of Geelong, is a young and new migrant to Australia. She and her husband, Kashyap have been planning to buy their first house for nearly a year now. The young couple is waiting to see what the Morrison government has for first home aspirants like them.
“We have been planning to buy our first house for some time now but the announcement made by the Liberal Party before elections has delayed our decision further. On one hand we are attracted by the 5 per cent deposit scheme but on the other hand, we are seeing property prices go up. The scheme will become clear only in January 2020, and prices will continue to increase. We are really confused about what to do,” she says.
Property prices have been showing an upward trend and so has the clearance rate of auctions.
Gordon Garg of Universal Real Estate Vic explains.
“Property clearance rates in Victoria alone have gone from around 50 per cent in May to 70 per cent today. This shows the property market is picking up. The 5 per cent deposit scheme is a great idea to increase housing affordability but who knows when the scheme will finally be rolled out and what it’ll bring with it? If first home buyers postpone their decision to buy till then, they can be sure that they’ll buy the same property at a higher price, which will offset the saving they intend to make by a 5 per cent deposit. Plus, till people buy their own house, they continue to pay rent. They are only helping their landlord pay his/her mortgage instead of themselves,” Mr Garg elaborates.
First home aspirants like Sartaj Dhaul have heeded this advice. He and his family will soon be moving into his first house.
“Political parties give you many reasons to vote for them. The 5 per cent deposit scheme sounds great but it is still an idea. We don’t know what it’ll become once it’s rolled out. So I thought instead of letting my kind of house slip away, I’d rather buy and get done with it. Instead of paying rent, I’ll now start paying my mortgage,” reasons Mr Dhaul.
Paying mortgage has never been easier in Australia, with two recent cuts, that have brought interest rates in Australia at their lowest ever.
Virendra Anand, who has been a mortgage broker for nearly two decades, says he has seen interest as high at 8 per cent.
“Australia hasn’t seen a better time to get cheap home loans than today. The market sentiment is looking up, interest rates are coming down and the 5 per cent deposit scheme is a pie in the sky. What is there to wait for until January 2020? People are attracted by the sound of this scheme but they forget that such schemes take a lot of time to become a reality as they have to be passed via parliament,” Mr Anand says as he highlights his experience spanning 19 years with lenders, borrowers and the real estate market.
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