First-home buyers are beginning to get lucky

The competition was fierce and the atmosphere tense as the bidders each strained their finances to claim the small apartment near Bondi Beach. But, eventually, as has been the case so often in the past few years, the investor triumphed over the dejected first-home buyer.

“It was a shame,” says Mary Anne Cronin of agents Phillips Pantzer Donnelley. “I was gunning for the underdog, the first-home buyer, but maybe soon …”

But first-home buyers could finally be starting to look like the winners from the banks’ new lending restrictions on investors, which are likely to slash competition for lower-priced Sydney properties. Investor loan growth had already dropped to 16.5 per cent in July, from 29.6 per cent in April, and those new tougher regulatory steps to curb investor demand are now starting to bite.

“We’re now getting more inquiries from first-home buyers and they seem to be gaining in confidence,” says Cronin. “With the clearance rate down, more properties and fewer buyers at auctions, we’re seeing a bit of a shift in the market. They’re getting a bit more power now.”

This group of buyers were, effectively, being squeezed out by investors, says Shane Oliver, chief economist at AMP Capital Investors. “It’s still early days, but first-home buyers will have a bit more breathing space. We’re seeing a rise in owner-occupier loans and part of that will be for first-home buyers.”

He entered the housing market himself as an investor until he could afford to live in his property and now feels that particular path, with buyers perhaps choosing to live with parents and negatively gearing until their finances are healthy enough, is now going to be harder. “I feel for them,” he says.

In addition, a drop in investor buys could force up rents for potential first-home buyers who aren’t living at home, and struggling to save a deposit, says  Domain Group senior economist Dr Andrew Wilson.

“If there is less competition from investors, then perhaps first-home buyers will have a better go, but fewer rental properties and higher rents will hinder those trying to save,” he says. “Also, it will only affect local investors; there are still foreign investors buying.

“In the longer term, those lending measures are about limiting growth and are nothing to do with improving affordability – and that’s the biggest hurdle for first-home buyers.”

But on the plus side, parents are increasingly helping their kids with the deposit, seeing fewer investors up against them, says Clare Rutledge, head of Urban Living by LJ Hooker.

“The effect of the new bank lending rules is starting to trickle down and investors aren’t so heavy on the ground now,” she says. “We’re seeing first-home buyers showing more confidence.”

In addition, parents who were planning to invest in property are now preferring the cheaper financial option of investing in their children’s purchase instead. 

Dennis Vertzayias, associate director at McGrath Projects Sydney (see Tempo opposite), says: “Buyers at the weekend told me their parents are pulling their dough out of the stock market as it’s not performing too well. Then, instead of investing themselves and facing that tougher lending regime, they’re giving them more cash to top up their deposit. It’s opening the door for first-home buyers.”

 New development typically tends to attract more cashed-up professional investors, so is less affected by the new investor lending regime. But new homes – attracting a $15,000 grant for first-time buyers under $750,000 with stamp duty discounts – in outer-ring, less expensive areas like Castle Hill, Baulkham Hills and Blacktown are attracting a surge of new-comers.

“As many as 15 per cent of our buyers there are first-timers,” says Curtis Field, national director of residential project marketing at Colliers International. “They’re emerging markets they’re finding more affordable.”

Which are the cheapest suburbs in each area for first-home buyers?

Tighter regulations help

As a first-home buyer, the one thing trainee magician Davide​ Serravalle wishes he could conjure up is a whole heap more money. In the absence of that, he’s happy to see the tighter regulations in place for investor borrowing.

“I think it’s good that they’ve now made it harder for investors to get into the market,” says Serravalle, 29, who’s just moved to Sydney from Cairns with his own engineering company. “Investors in the market were really driving property prices up and making it hard for first-time buyers to get in.

“It just wasn’t affordable for the young generation, so I’m very glad the government has acted to make sure there aren’t as many investors competing against us for a house.”

First home buyer Davide Serravalle has just purchased a house at Gledswood Hills, near Camden.

Serravalle has just bought a house in developer Sekisui House’s​ The Hermitage master planned community in Gledswood Hills, Camden. He bought a signature Shawood house, which range from $734,000 to $765,000 for single and double-storey homes.

“I love the architectural design, the open-plan living, the spacious rooms and the space and quiet,” he says. “And I think with not so many investors around, prices are becoming more realistic.”

The aspiring magician had been house-hunting for six to eight months before chancing on an ad for The Hermitage and putting down his deposit immediately. He moves in next week.

“I missed out on a number of auctions, with a number going way over their reserve because of investor competition,” he says. “If only I could have made them vanish myself!”

Feature property:

Artists impression of the Tempo development in Drummoyne.

Tempo, 48 Formosa Street, Drummoyne
$675,000-$1.55 million

Most developers usually plan new apartment projects to make them the biggest return, but Dennis Vertzayias, of McGrath Projects, says real estate fund manager EG Funds Management approached him about its planned apartment building in Drummoyne, Tempo, with a completely different aim in mind.

“They said it was a great development in a prime spot, and they wanted it to cater primarily for the local market,” Vertzayias says. “We know that’s a part of the inner west, where people grow up and want to stay, but it can be hard to find anything affordable.

“So as a result, we ended up with a very, very good portion of big one-bedders under $750,000, a lot with views, to cater for that first-home buyers’ market of singles, couples or young executives who want to be in that area, close to the city.”

Designed by architecture practice Fender Katsalidis Mirams and located close to the harbour foreshore, the five-level, 164-apartment building has views from every angle of the bay, the central business district and the neighbourhood, and will have cafes, a grocer, a restaurant and stores on the ground floor.

“It’s all about lifestyle on the fringe of the city, and is ideally suited to first-home buyers, as well as having two and three-bedroom apartments for the broader market,” Vertzayias says.

Tempo will have one beds (average 55 square metres) from $675,000, two beds (average 82 square metres) from $925,000, and three beds (average 110 square metres) from $1,375,000. www.tempodrummoyne.com.au .Phone 1300 229 300..

Open for registrations now, with an on-site sales suite coming soon. Completion expected in 2017.

Or try these:

18/62 Mascot Drive, Eastlakes Photo: Ian Robertson

18/62 Mascot Drive, Eastlakes
$650,000+

Eastlakes is the next boom pocket, yet is still affordable for first-home buyers, says LJ Hooker Mascot’s Peter Grant (0415 907 187). “Botany and Mascot have both had a good run, and now it’s the turn of Eastlakes,” he says. This three-bedroom apartment in a low-maintenance, red-brick block with a lock-up garage, a short walk to shops, goes to auction on October 10.

28 Adeline Street, Bass Hill

28 Adeline​ Street, Bass Hill
$770,000+

This recently renovated three-bedroom house, with an expected auction sale price just over the median price for one of Sydney’s favourite areas for first-home buyers, has an open-plan kitchen and dining area, high ceilings, an undercover entertaining area and split-system airconditioning. For sale via Riverwood Ausrealty​ Estate Agents’ Joyce Boustani (0415 778 969).

10/33-35 Windermere Avenue, Northmead Photo: Supplied

10/33-35 Windermere Avenue, Northmead
$800,000+

This three-bedroom, two-bathroom townhouse with a double garage will go to auction on October 10, if it’s not sold before by Lisa Kringas​, of Raine & Horne Baulkham Hills (0411 763 771). It has open-plan lounge and dining areas, a private courtyard, and easy access to the Parramatta CBD.