5 ways to make 2021 the year you enter the property market

Posted: 8 January 2021 1:53 pm
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With rock bottom interest rates, changing work habits and government support, 2021 could be the year of the first home buyer. Are you ready?

As Australia recovers from the COVID-19 pandemic and the subsequent recession, property prices have started to rise. Based on current trends, 2021 is looking to be a very busy year for home buyers, with low interest rates and housing policies making it (comparatively) more affordable for well-prepared buyers to enter the market than it has been in recent years.

Don't miss out. Get your finances in order, rethink your strategy, look at the numbers again and make 2021 the year you buy a home.

1. Do a budget and look at the numbers again

A lot changed in 2020. Property prices fell in Sydney and Melbourne (although they're already coming back), interest rates plummeted, many people's spending habits changed drastically as the pandemic hit.

So review your spending and draw up a realistic budget for your current situation. Things may have changed more than you realise. Work out how much you can comfortably spend on mortgage repayments every month and figure out how large your deposit is.

And if you don't have the deposit saved yet, work out how much you can realistically save and when.

Read our guide to saving a home loan deposit

2. Look for a low home loan rate

Home loan interest rates fell throughout the year as the Reserve Bank made borrowing costs cheaper in an effort to spur the economy. This means home loan repayments are lower than they were a year ago, if you get a home loan with a cheap rate.

Here's the difference. Let's say you borrow $500,000 over 30 years and your rate is 2.98%. Your monthly repayments would amount to $2,102.

But you could fix today to a rate of 1.98%. With the same loan amount, your repayments suddenly shrink to $1,843 a month.

That saves you $259 a month or $3,108 a year. And lower rates make it easier for hopeful buyers to afford a home loan or borrow slightly more.

Redo your repayment calculations with a competitive rate and see if it changes your situation. That being said, it's also important to factor in rate rises in future. So see how your repayments look with a rate closer to 3% just to make sure rate rises won't hurt you too much.

3. Consider a regional move

With more people working from home during the pandemic, it's become clear that not everyone needs to live in Australia's big, expensive cities.

If you're in a position to work remotely or don't need a city or suburban lifestyle, consider a move to a small city or town. Your money could go further, and if you're priced out of the bigger cities it might be your best chance to buy in 2021.

But you wouldn't be the only one making the move. Regional prices are growing. December's CoreLogic home value figures show that regional house prices rose 6.9% over 2020. Prices in capital cities grew 2.0% over the same period.

4. Rentvest instead of buying a home

Rentvesting is a good strategy when you can't afford to buy a home where you want to live. Instead, you keep renting and then purchase an investment property in a cheaper location. This way, you live where you want to live and still enter the property market.

Rentvesting works well when you put emotion out of the equation and buy a property that you can rent out and that has good growth potential.

5. Look into government support options

There are quite a few housing policies now that can benefit buyers. Federally, there's the First Home Loan Deposit Scheme, which lets you buy a home with just a 5% deposit while avoiding the extra cost of lenders mortgage insurance.

You may qualify for the HomeBuilder grant too, which can net you $15,000 if you're eligible.

Check the policies in your state or territory too. Victoria recently halved stamp duty for buyers purchasing properties under $1 million. This could save buyers up to $27,500 in taxes.

While not every buyer will qualify for every policy, even just one of them can save you money and make it easier to enter the market this year.

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