First Home Buyers Back in the Market

[suburbangirl]

Well I am hearing doom and gloom, and seeing doom and gloom, and yet, this week, three - count 'em, THREE - of my friends, all from different spheres of my life, have ALL announced that, thanks to the beefed up FHOG and lower interest rates, that they are finally in the market to buy/build a house.

I find this very interesting.

Obviously, being first home owners, they are looking at the lower end of the market - high $200's, low $300's. Personally, I would think, given the current economic climate, that even with the incentives of the new grant and lower rates, that you'd still be pretty cautious, because even with these incentives, a $300K house would still mean quite a significant loan for a single person to cover, and with a recession almost certain and more job losses right around the corner...not a pretty picture down the track, I would reckon.

I guess part of me wonders if this whole 'lets boost the economy via pushing up the housing market' will backfire, if recession means even more people not being able to pay their mortgages further down the track (if that makes sense).

Ah, I guess we'll see, won't we?

 

[Peter Parker]

I'm hearing same.

Been trying to get a friend (Gen Y on a good income) to buy, since he's aways said he wants to. But suggestions about paying off the car loan this year and saving a bit fell on deaf ears. Plus his expectations were too high for the budget.

Last week a mate of his (younger than him and still at uni) bought a place (with parental help). Then Rudd announced the FHOG changes.

So all of a sudden my friend is says he wants to save up and started asking me about loan types!

 

[Bon]

The 1% interest rate cut made me think about getting my second IP, the FHOG was the trigger for me to buy my second IP, no ifs & buts - I put a deposit down for a second one today!

 

[AnneDe]

Had to ring home loan center this afternoon for one of the major banks regarding an existing IP loan query and was told to 'ring back later' before being cut off numerous times, due to high volumes of callers.

When I eventually got through this evening to a person, not a recorded voice, she said they have been absolutely flat out since interest rate reduction and increase in FHB grants.

Could be an indication of an increase in volume of people including first home buyers organising their finance for a home buying spree.

Interesting times ahead.

Cheers,
AnneDe

 

[Nth Brisbanite]

I was talking to an agent from a fairly large but busy office in the inner suburbs of Brisbane today. She said that the increased grant and decrease in rates hadn't made any difference at all to sales and enquiries. In fact she hadn't had any enquiries from 1st home buyers. Maybe the suburb is too expensive for them.

 

[katy1111]

Could someone please explain to me, why people should be encouraged to stop spending, when that is more likely to cause more job losses, and may get a larger percentage of the population into deeper trouble? If someone understands, I would really appreciate hearing the reasons


However I understand completely that people should not overextend themselves with regard to debt.

 

[Peter Parker]

Could someone please explain to me, why people should be encouraged to stop spending, when that is more likely to cause more job losses, and may get a larger percentage of the population into deeper trouble?

We were told to stop spending earlier this year when interest rates were put up.

But now we're told to spend like there's no tomorrow, with the government giving anyone who can say pensionfamilyfirsthome a heap!

 

[urchin]

Could someone please explain to me, why people should be encouraged to stop spending, when that is more likely to cause more job losses, and may get a larger percentage of the population into deeper trouble? If someone understands, I would really appreciate hearing the reasons


However I understand completely that people should not overextend themselves with regard to debt.

i think the whole "support the economy by spending lots of money" is a lot of bunk, to be honest. consuming does not create anything. look at america. look at the state it is in. that is what a consumerist ethic gets you.

of course you consume to an extent, but all things in moderation. besides, what have you consumed lately? did you look at the label or packaging? where was it made? if it is a consumer good, i am guessing china or india or indonesia.

how is buying more plasma tvs going to help the economy?

for that matter, how is buying a house going to help the economy? unless you are buying a newly build house, it is simply money changing hands. nothing is produced as a result of the transaction. the only "benefit" it creates is that it pours money into govt coffers (via stamp duty and maintaining high property valuations for rates) and real estate agent pockets.

consuming is fine as a by-product of a healthy economy but it is not the engine of said economy.

 

[Spectre]

I've had a big shift in FHB enquiry over the last week. All Gen Y (per se).

Do agree there is concern with being told by the govt to go out and spend. Something in my mind is niggling me that Bush said that after 9/11.

Katy, I think that we're still waiting for a good answer to your question, and its an answer nobody really knows. But I tend to think that people have to do something as if they dont then there'll be a hell of a lot of shops closing.

The way I see a by product....

Say you're a chicken farmer. You used to sell chickens to KFC and they cook em up and sell to consumers. When they kill em off (or whoever does) they'll have legs, gizzards, feathers, poop etc which are by products. But the by products then become products as people eat gizzards (they are yum deep fried and crumbed), poop for manure and I think fuel, feathers for pillows and so on.

So the byproduct becomes a product. And I dont see either as a bad thing.

And we need to get and assist the FHBs into the market to establish a base

 

[urchin]

The way I see a by product....

Say you're a chicken farmer. You used to sell chickens to KFC and they cook em up and sell to consumers. When they kill em off (or whoever does) they'll have legs, gizzards, feathers, poop etc which are by products. But the by products then become products as people eat gizzards (they are yum deep fried and crumbed), poop for manure and I think fuel, feathers for pillows and so on.

So the byproduct becomes a product. And I dont see either as a bad thing.

And we need to get and assist the FHBs into the market to establish a base

So the banks and REAs are chicken farmers and we FHBs are the hapless chickens about to be strangled, with our gizzards and poop to be sold as compost? nice analogy!(j/k)

 

[sash]

Hmmmm......Gen Ys rushing in to buy? If they are (I have no indication at this stage they are)...its like lambs to the slaughter! Also, finance is harder to get....so looking might not translate into sales.

The agents I am talking to have said buyer enquiry has dropped off.....they believe very little activity will happen between now and the new year. They believe buyers, if they move will be in the new year base on whether the credit crisis stablilises.

For the record, I am in camp which is waiting and seeing.

As someone said....people always underestimate how bad things will get (my self included here ). This game is all about human psychology!.....when emotions are involved even the smartest people do dumb things...it has always been... human nature. So in my case I have had to sit on my hands and DO NOTHING in property!......that is very hard. Shares are another story....and I am active here.

To give Kudos....where is Alex .....he seems to have called the impact quite well.

 

[Spectre]

I dunno...

I dont think Rudd is they type of guy who's going to shoot the people who voted him in.

Could be a case of the people you speak to and the people I do are in different markets. Usually we deal in the gen x's / investors space. But now due to the grants increasing we're getting the Gen Ys 2 years out of uni now in solid employment with a bit of a deposit.

14-21k gives them an instant 5% and if it doesnt then we do a 100% loan or a non gen savings and we use the 14-21k to pay off the car loan. So where the people say its so hard to save a deposit these days, they now dont need to.

I kind of look at it and think - how long does it take anyone to save 14-21k? ages usually

But if finance is getting harder to get for people then its more often than not those people that you dont want to get the finance to begin with, and if its an issue where people are trying to screw the govt re the grant and having trouble then that isnt the banks fault either.

Think Alex is still sitting on the side - the time being. But no way I'd compare him vs a FHB. Different kettle of fish entirely

 

[letiha]

I dunno, I called 3 agents yesterday with enquries regarding specific properties, all of them were with someone, left my name and number and was promised a call back within 30 minutes...guess what 24 hours later no a single call back.

 

[Waverlybay]

Some positive vibe in the market ...

http://www.smh.com.au/news/national/buyers-rally-as-rates-drop/2008/10/18/1223750399532.html


but we still need to wait a little while before we can assess whether this initial optimism is going to translate into a change in sentiment in the property markets

http://www.theage.com.au/national/auctions-fall-despite-grant-boost-20081018-53nk.html

 

[<KS>]

I am also a pessimist when it comes to rapid market swings. The last 7-8 year boom we experienced was well grounded...we were in the boom for about 18 months before people even clued on. I myself bought our first property in what would have been the first 6 months of the boom - it was a massive suprise to me 18 months later when my property was valued at $30k (45% higher) than what I paid for it.

Now that people are saying the boom is on its way back before it has even started I question the validy and grounding of such sentiment. It feels a lot more like the share market atm with power plays boosting and dropping the market on a whim. The fact is many people will be out of jobs soon and jobless people cant pay high mortgages. So yes, interest rates may fall - but house values will unlikely increase until the economy has truly stabilised as jobless or overextended people cant pay big mortages, even at lower rates.

Lets face it - even with 14-21k in perks - how many FHO do you know who wont be tempted to visit harvey norman or their local holden dealer?

<KS>

 

[Peter Parker]

Lets face it - even with 14-21k in perks - how many FHO do you know who wont be tempted to visit harvey norman or their local holden dealer?

A critical thing is that the $14/21k will be of most help to those with nearly enough savings to put down a deposit now. Grant or no grant, those people have already effectively made a decision to buy and demonstrated an ability to do so by saving the deposit. Even if there was no FHOG (or it hadn't been increased) most of them would have bought anyway in the next year or two.

Then there's the second group - the (mostly) Gen-Ys who weren't planning to buy but got fired up by the increased grant. Right now these people are saying that they're going to buy. But to do so requires going from having negligible savings to most of a deposit well within a year.

It's a big ask and requires a change to years of money habits to achieve. Not all will succeed and it will be interesting to see how many actually carry through. Some will give up and 'go Harvey Norman' (or Holden). Those in the second group who do buy are more likely to have the savings next year than right now. But those in the first group who buy now may well be more advantaged as they got in before those who had to wait to save up before they could buy.

Peter

 

[piNoob]

so how does that work?

FHB couldn't save enough deposit to afford their first house and now because they got extra 7k they suddenly realized they can?

Are they buying houses for 100k or something?

 

[<KS>]

I agree Peter - those buying now are those who previously procrastinated and will be the ones tempted to buy toys + the house, just like some sick people have kids so they can buy a plasma (and YES this really does happen) - but those next year will genuinely use the money for a deposit IMHO. The catch is - if prices do stop falling or even go up then it will cannabalise the extra $$ they got given.

The bottom line is the winners will be those who get in fast and dont waste their extra $$ - but even then, thats IF the market does not further pOO itslef.

<KS>

 

[sparky23]

Just a word from the coalface, over the last few days the building company I work for now has seen a 64% increase in hits on the website since the FHOG announcement. Furthermore at the houses I am selling in NSW we took a deposit from FHB on Saturday and this morning I received a call from another one who wants to buy, just helping him to work out some finance but he is expected to deposit tomorrow. During the week I generally get either 1 lot of people or no-one to show through the homes but today there were two lots 1 FHB and 1 investor and yesterday another FHB. In speaking with a friend working for another building company he has also confirmed that FHB are coming out of the woodwork.

Best of all as of today the company is offering an additional $10,000 rebate amounting to $31,000 of benefits all up for the FHB but they are also giving this rebate to investors and people looking to buy a home who are not FHB.

My personal thoughts are that there will now be a feeding frenzy between FHB and investors all chasing the properties in the lower price brackets and that there are so many people that have been holding off that these cheaper properties will clear quickly and property values will turn before people realise what is happening and many will miss out on the bargains.

For me that will be good and bad, good because at last my properties will sell and bad because if I could have held on just a little longer I could have clawed back some of the lost equity.

Just my two cents worth but I really would be shopping right now if I was in a position to do so - next year might be too late!

 

[Spectre]

Sparky

I was seeing a developer on the s/side of brisbane today and they're doing the same, so I'd assume they're trying to ensure they snag as much of the build business rather than have it go to established. Its also an offer I cant see REAs competing with (outlay/dollarwise if you see what I mean) in getting a rebate regardless of FHB or investor.

But at the end, somebodys paying for it somewhere.