Buying your first home: All the costs you need to consider

In the first half of 2019, a turbulent property market led to a national downturn in housing prices. But the good news is that we’re on the road to recovery for 2020.

SQM Research is predicting that prices in Sydney and Melbourne could rise by 15% this year, which would make it an opportune time for first home buyers to enter the market.

So, if you’re a first home buyer and thinking about stepping onto the Australian property ladder, it is important to start considering what the real cost of a home is, before committing to a particular budget.

Why now could be the right time to buy – depending on location

Despite it being a tough start to 2019, the positive turnaround in October has seen property values experience their fourth consecutive month of growth nationally, according to CoreLogic figures.

The general consensus among investors is that there are encouraging signs which suggest that the Australian property market is well on its way to recovery.

The 2019 Property Investor Sentiment Survey found that an incredible 82% of investors believe “now is a good time to invest in residential property”, up from 77% in 2018.

However, this opinion isn’t one-size-fits-all. The outlook will depend on where you want to buy, as there are still fluctuating markets specific to particular regions and cities.

For example, Middle Ridge – a popular suburb in Queensland’s biggest inland city, Toowoomba – came out relatively unscathed from the 2019 housing downturn, despite neighbouring suburbs dipping in value. What’s more, it’s tipped to be one of the best performers for growth over the next three years.

On the other hand, Perth’s housing market is still lagging behind the rest of the country. So while this may mean first home buyers can nab a bargain, there could potentially be a further drop in property values before the inevitable upswing.

The bottom line: do your due diligence and research the outlook for your favourite suburbs before making an offer.

5 financial considerations in addition to the property’s value

What are the biggest costs of a home beyond the property’s price tag? When setting your budget you’ll need to consider:

  1. Stamp duty: This will be your largest outlay beyond the actual price of the home, and it varies depending on the price of your home as well as where you are located. Use a stamp duty calculator to find out how much you’ll owe. A home worth $750,000 in NSW, for example, will have stamp duty costs in excess of $29,000 (just over $21,000 for first home buyers).
  2. Lenders mortgage insurance (LMI): You won’t need LMI if you have a 20% deposit for your new home, however considering the rising cost of homes, many first home buyers will need to pay this fee (typically between 1–3% of your loan amount).
  3. Building and pest inspections: Before entering into a contract, you’ll want to ensure the property is in good condition. While these inspections will cost a few hundred dollars, the fallout of a termite colony in your home if undetected could lead to thousands of dollars in damage.
  4. Conveyancing fees: You’ll want a conveyancer or legal expert to manage the contract, check the title and arrange settlement documents. Costs can vary, but typically sit between $700 and $2,500.
  5. Moving costs: Even if you’re not paying for removalists to take care of moving everything into your new home, you’ll still need to take into account the cost of hiring a truck and/or trailer, fuel and any ad-hoc labour costs.
  6. Home & Contents Insurance: Most mortgage lenders will require you to take out Home Insurance before your loan is approved. CCI can insure you home, cherished possessions and portable contents. Get a quote today and refer to the PDS for complete terms, conditions, limits and exclusions.

You’ll also need to consider additional expenses like setting up your utility services for gas, electricity and water.

Get a foot in the door with government grants

The good news is that as a first home buyer, you’re not alone. Depending on your eligibility, you may be able to receive grants from the government to help cover the cost of things like stamp duty and LMI.

  • First Home Owner Grant (FHOG): The amount you are eligible for varies from state to state, and also depends on whether you are building a new home or buying an established property. Check the main FHOG website then click on your relevant state or territory for further details.
  • First Home Super Saver (FHSS) scheme: To help first home buyers enter the property market, you have the ability to put up to $15,000 (annually) of your voluntary super contributions towards your first home. The maximum you can contribute is capped at, $30,000. Although, if you get your partner to take advantage of the FHSS scheme as well, you can have a combined maximum of $60,000.
  • First Home Loan Deposit Scheme (FHLDS): The FHLDS is an election promise from the Coalition that will slowly take effect from 1 January 2020. It will help buyers with as little as 5% deposit to purchase a home, and will support up to 10,000 loans every financial year.

While you may not be eligible for all grants and schemes, you might be surprised by how much a little injection from government funding can help stretch your budget.

When it comes to insuring your home and contents, consider CCI Home Insurance. Dial 1300 655 003 to talk to an insurance specialist and find out how to insure your first home, or get an online quote today.