EP. 1218 THE REALITY FOR FIRST HOME BUYERS IN SYDNEY... 🛍️🏡

Remember the day I sat my 25-year-old daughter down to have the talk—not about the birds and the bees, but about the even more bewildering world of first-time homeownership? Well, that's just the tip of the iceberg in our latest episode where we peel back the layers of buying your first home with a veteran homeowner who took the leap in the mid-'90s. Together, we candidly traverse the emotional landscape, from the initial thrill of saving for a deposit to the sobering aftermath of mortgage assessments and the realities of life with a new set of keys in hand.

Our guest's insights bridge the generational divide, offering a rare comparison of past and present challenges in the housing market. We expose the daunting fiscal expectations set by banks, dissecting income multipliers and interest rates that often leave hopeful buyers in the lurch. The conversation takes a personal turn as I reflect on the potential heartache of being priced out of one's own hometown, a sentiment that resonates deeply with families today. Join us for an unvarnished look at the first-time home buying experience, where dreams meet budgets and the journey is anything but predictable.

Transcript

Speaker 1: 0:01

the reality of owning your first home. It's not what you think. We're going to tell you the truth. New and old, first-time buyer.

Speaker 2: 0:45

I'm the ringleader, so what's up? How long ago did you buy your first home?

Speaker 1: 0:50

Ninety-ninety-five, four, and you still own the property. Yeah, and is it still one of the favourites? Yeah, yeah, it is so funny to compare first home buying stories with mom and dad, with your friends, with your work colleagues, with your boss. Whether that was 10, 5, 2 years ago, I think everyone's got a similar story. The buildup is exciting, it's nervous. But I think the reality once you've bought your first home is not what most people would think you know prior to actually purchase. Would you agree?

Speaker 2: 1:33

Yeah, I thought really important dialogue for this morning to bring you on screen to talk about what you have gone through when you bought. And I think everyone's perspective from a first time buyer is normally brought to them by someone who's done it or somebody sort of 10, 20, 30 years their senior. So I thought it'd be great to have someone you know, um that's um under 35, um under 30, under 25, um they're gonna to have that sort of discussion and, you know, talk about the real reality, because you know it's really, really tough.

Speaker 1: 2:12

Yeah, I feel so, so lucky to be in a position where I was able to buy my first home At the age of 18, I'd been saving for two and a half three years prior, working hard during the book, which is a lot, but it was a goal that I was really pushing for. And I felt so lucky to come into a position where I had a really good team around me. What I mean by that is an amazing boss, great mum and dad, really supportive and fantastic help outside, with a good broker and a good solicitor. So I think that that sort of made the world of difference. But two, you know, two, three years of saving. It's so funny it comes and goes so quickly. Once you reach your deposit, you actually find yourself in a buying position. But the reality is, what caught me off guard and I never considered it, was how the bank would assess you as a first-time buyer and what life would look like after purchasing the property, once you start owning the property.

Speaker 2: 3:20

Well, there's certainly no compassion from the bank, and nor should there be. But I was talking with a friend of mine in banking about how much you actually need as a first-time buyer today when they're assessing you at interest rates of 5% or 6%, and you know I've been having. She was saying she'd been having that conversation with her kids and lisa, and I was saying we've actually recently been having a conversation with our kids as well. It's, it's a shocking, it's a shocking amount of money, um, that these guys have to be earning and and and I think everyone's just a little bit perplexed at the moment with how a first-time buyer is actually meant to come up with that sort of deposit, which sort of hasn't been a moving target as much. But the moving target is the income, the amount of sheer income. You're going to have to show the banks you can support that loan.

Speaker 1: 4:26

It's a huge amount of money, so they work on a multiplier of about 5x your income. So for every dollar, you own. You can basically borrow 5. To put it in simple layman's terms and that's where it becomes tricky for the reality of first-time buyers. In Sydney, if you're earning $100,000, which is a huge amount of money, you can effectively borrow $500,000, which doesn't get you very far, particularly on the northern beaches, eastern suburbs, lower North Shore, I think everywhere, everyone is starting to see those entry-level price points move.

Speaker 1: 5:06

Know, everyone is starting to see those entry-level price points move, and so it's certainly frustrating as a first-time buyer to save work and live your whole life in your, in your hometown, and then not be able to afford to buy back into your hometown. I think that's that's what, um, you know, frustrates people the most I had a?

Speaker 2: 5:22

um really good conversation with my 25 year old daughter, um, about buying a place, and it went a little bit something like this where I said to her when did you start working? And she said 16. I said how much did you earn that year? She said x or a and I said 17. Did you work? Yeah, how much did you earn b, uh, 18, 19, 20 to 100 to? We were not. We wound out to 25 and I added all those up and I said so you've worked effectively part-time or full-time for X amount and I said you've probably gone through. I think we came up to about five hundred and six, five hundred and eighty thousand or something like that, you know, since you started working at school yep right.

Speaker 2: 6:13

So I was like, where's the money gone? She's like, and then right, right. So then I said, okay, now call that success. I said what does the next five years look like? What are your projected earnings? And we added up five, six years. Okay, so you've gone through that much. And then I said what does the next six years look like? And let's go through that. And I said, potentially you don't buy a property, you're going to chew through about $1.1 bucks over a 12 year. Over a 12 year period, say. I said I reckon you can chisel out your mortgage in the out of that money. I just I just what do you think? It's? Just like I said, all right, what if you don't? What if you did buy a property? What would that look like with your cash flow plus your capital growth?

Speaker 1: 7:15

Yeah.

Speaker 2: 7:17

And that's when it really came out, where, when I added in five years of capital growth, or the next five years of capital growth just going off the last 50 years, right, she was like I actually can't afford not to do this. That's what I want to say today. It's going to hurt and it's going to be painful, but if you map out your last five years what you've actually earned and spent and you map out your next five years, it's a lot of money. Then you map out the capital growth you're not going to get if you don't buy.

Speaker 1: 7:52

I don't think you can afford not two guys and girls, it's um yeah, it's really interesting to look at there's a couple of things that I have to say, since buying a property I I never really considered, or you know what surprised me the most. Number one is that buying the property itself is actually the easy part. Getting to your deposit is actually the easy part. It's then financing it and the repayments are the hardest. So I think if you are fortunate enough to have a year or two with mum and dad once you've purchased, it will take a huge amount of pressure off your shoulders.

Speaker 1: 8:30

I personally can't really imagine moving into a property straight away because all your finances are turbulent at that point. You've just paid out a huge amount of your savings for your deposit. So if you can sort of just rely on family support a little bit just for the first six to 12 months, which is great, that really helps and you can establish a cash flow through your property as a first-home buyer, you don't need to move in instantly. You can move in for the 12-month period within 12 months. So there's that sort of initial 10, 11, 12 months where you can set yourself up with a bit of cash coming through. It'll really help. So the repayments is probably the hardest thing adjust to, but on the flip side of that it does set up some really good saving habits and spending habits. It just becomes like an expensive phone bill. You get used to it, you adjust and um, you know it'll be all right. That's you know.

Speaker 2: 9:27

The fangs already sort of buffeted that into your lending, so that's um can you explain the concept of just renting it out and staying at your parents or staying in cheaper rental accommodation? Because I think this is the number one biggest myth that first home buyers think they've got to stay in this place until until for the rest of their life, until further notice. Can you explain that?

Speaker 1: 9:52

yeah, it's far from the truth. Obviously, everyone wants to buy the best first home possible, but people get caught up in missing the opportunities that pass them by. You don't need to, you know, have this as your forever home, guys. Um, there's. There's a condition that if you're gonna buy as a first time bar, you need to move into it for 12 months. Condition that if you're going to buy as a first-time buyer, you need to move into it for 12 months. For 12 months, but it's not straight away. Could be six months actually.

Speaker 2: 10:16

It's not specifically 12.

Speaker 1: 10:20

Yeah, well, six to 12 is what they've got on the New South Wales Fair Trading website, but beyond that, unless you fall into financial hardship, you're free. You're a free bird. Rent it out and, yeah, move back to mum and dad, move into a share house, do what you want.

Speaker 2: 10:42

Yeah, because if you, if you do fall into financial hardship and you can prove it, you can even get in sooner, I believe. So it doesn't have to be 6 or 12 months. But this what we're talking about is on the back of what Luke's brought up. It's that print. They call it rent vesting, so it's I guess you could say it's a first home buyer rent vesting, so they go and rent somewhere else, they rent out the property that they purchased as a first-time buyer and that really helps with the cash flow in these five or six percent interest rate times yeah, I agree, I think that's.

Speaker 1: 11:23

That's all you've really got to worry about. Forget that. Forget the number on the purchase price. Forget the number the bank's going to charge. Just worry about how much it costs each month, and if you can manage that, you're on to a winner. Anything else, no.

Speaker 2: 11:36

I think that's it, anything else.

Speaker 1: 11:38

No, I think that's it. It should be exciting. I see a lot of people get nervous. The other big thing to remember anything under $800,000, you pay zero stamp duty on, so there's a saving of $31,000 there, straight back into your pocket. Anything from $800,000 to a million. It's a concession rate, so you get a little bit back. I think that's a really good advantage to take off hold of. And um talk to a broker, talk to um friends, family real estate agent. If you need help, it's um.

Speaker 2: 12:11

It's all about just that first conversation and I think the bottom line, uh, it's gonna hurt and you're to need your tribe around you and probably going to need to rent it out, but it is going to hurt. But I think if you look at the flip side of not doing anything for five or ten years or at all, it's going to hurt a lot more yeah and remember you can start this at any age.

Speaker 1: 12:35

That's another thing I really like. I'm meeting people at 18, 20, 50 some people coming back into the market as a first home buyer after they've actually purchased but been out of their own home for 10 years. You're now eligible as well, so that's that's the biggest one out of today.

Speaker 1: 12:52

Can you explain that again, if you, if you've bought a home before, but you've been out of that first home for more than 10 years. You sold, you moved on, you um split ways with your partner at the time and you've now been out of your first home for more than 10 years.

Speaker 2: 13:09

You're back in as a first-time buyer so you're not a first-time buyer, but you get all the first-time buying incentives that's right that's a big one for people to know. Yeah, have a great day see ya thanks guys, let me see ya. Bye.