Why buying your first 'dream' home when you're older might be a better option

When you imagine a first-home buyer, they tend to be in their late-20s, buying an entry-level home that will be their launch pad to trading up.

But some first-time home owners are buying more expensive homes later in life, looking for a property more akin to their dream home than someone’s typical first house.

At least, that’s the strategy that Hamish Watts, 35, settled on with his fiancee Sarah and 18-month old daughter.

As part-owner of hospitality company Applejack, he’d been investing and re-investing his money into his business rather than into the property market until they decided it was time to buy. He believes he got better returns this way.

By waiting until they were out of their 20s and in a comfortable situation, they were able to buy a $1.3 million two-bedroom, two-bathroom garden apartment in Sydney’s Bondi area.

“Bondi is somewhere I always wanted to live, for the village environment and the beach. I have businesses in the Sydney metro and I like to surf, so it was imperative we were close to the city and the beach,” Mr Watts said.

He said they couldn’t picture buying an investment first or moving further out west, so waiting until they found what they wanted and could afford it made sense.

But while it is their dream home for now, it’s not their forever home. They hope to have a bigger family at some point and eventually may retire up north.

“I started looking passively 24 months ago [for a home],” he said, but couldn’t find anything that ticked their specific brief.

What they ended up with was a bit more modern, but he was “so glad” they considered it after the encouragement of Cohen Handler buyer’s agent associate Walter Nanni.

“Like most, they had missed out on a few opportunities and were starting to look for alternatives [including looking outside Bondi] as well as increasing their budget,” Mr Nanni said.

Competing against “old money” in the area, Mr Nanni warned the strategy of waiting to buy wouldn’t always work. In rising markets, property prices often increase faster than a first home buyer can feasibly save.

In 2011, close to 50 per cent of 21 to 34-year-olds owned their own home, with predictions this will dwindle to 24 per cent by 2019.

But waiting until you’re older to buy in a slower market could be beneficial, particularly for those whose future plans are up in the air, Finder.com.au money expert Bessie Hassan said.

Considering both future and current plans is critical to determining whether buying sooner or later is the best option. This would be a personal choice, she said.

“There’s no point buying an inner-city studio apartment if you’re planning on having kids in the next five years,” Ms Hassan said.

“If you buy the wrong property type, you’ll face the cost of relocating a little further down the track. If you don’t plan to stay put in the one location, renting could be a better short-term option,” she said.

These relocating costs could include paying stamp duty again, as well as selling costs, that might leave you financially worse-off than if you had remained renting and saving.

“However, when you purchase real estate later in life you also have more financial obligations such as making credit card or loan repayments or paying for family related costs such as childcare or medical expenses.”

Taking the time to save more than the minimum deposit was a good strategy and often opened up more locations and property choices, First Home Buyers Australia co-founder Daniel Cohen said. Entry level houses under $400,000 dwindled to less than 5 per cent of the Sydney market in 2016.

“Also, generally speaking, a larger deposit will put you in a better position to negotiate a better home loan with your mortgage broker or lender,” he said.

But he warned many first home buyers have been “giving up” and even leaving Sydney.

“Others are deciding they have little choice but to rent,” Mr Cohen said.