FOMO sees first home buyers battle unexpected costs

It's been an exceptional few months in the property market. In February, values rose 2.1% nationally - the biggest monthly jump since 2003. March saw a 2.8% uptick, the fastest climb in 32 years. Thankfully, price growth for April settled down to 1.8%.

By Paul Clitheroe · 10 May 2021

By Paul Clitheroe ·
10 May 2021 · 5 min read

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These results make for interesting reading, especially if you already own property. But they can leave first home buyers’ plans in tatters.

At the start of 2021, the median home price in Sydney was $871,749. Fast forward to the end of April, and the median is $950,457 – a difference of $78,708. For first home buyers trying to scrape together a 20% deposit it means saving an extra $15,000 in the space of just four months. No easy task for anyone.

Concerns about being priced out of the market are seeing some first home buyers fast-track their plans. According to Finder one in two (53%) first home buyers are getting into the market sooner than expected.

That’s fine if you’ve done your homework. But Finder found nearly six out of ten first home buyers surveyed are having to pay unexpected upfront costs to the tune of around $6,000.

These unplanned outgoings include insurance, conveyancing costs, lender fees and moving costs. They can come as a real hit to the hip pocket especially for home buyers who aren't expecting it.

Rising property prices are a serious concern for first home buyers. And yes, I’m a big fan of home ownership as a foundation of personal wealth. But fear of missing out (FOMO) rarely leads to good decisions.

Buying a home calls for planning. Draft a budget that includes all buying costs, not just a deposit. Be sure you can handle the ongoing costs associated with owning a home – council and water rates, insurance, strata fees in an apartment, and repairs and maintenance.

The bottom line is to be prepared before jumping into the market for the first time. Don’t get caught up in the hype. Remember, there are multiple pathways to buy property, from rentvesting, to buying with a family member or asking relatives to act as a guarantor for part of your loan. Checking out every option could help you find a way into the market that doesn’t leave you financially skewered.

For more information on how to save for your first home click here: https://www.investsmart.com.au/what-we-offer/buying-property-planning