The debate over the ability of first-time buyers to get on the property ladder has been reignited recently, thanks in part undoubtedly to the strongly performing Melbourne and Sydney markets. It reminds me of my first foray in real estate.
BY SHANNON MOLLOY
It was nearly a decade ago but I remember clearly that it was a Tuesday night and I was sprawled on the couch watching television, deeply engrossed in the nightly trials and tribulations from inside the Big Brother house.
I was in my final year of university but somehow I’d managed to rent a two-bedroom, near new apartment in a fancy high-rise building, smack bang in the middle of the CBD.
It cost an absolute bomb and my part-time wage didn’t last too long after payday, given my obscene rent and unrealistic lifestyle of going out, going out and going out. But I loved my pad. I had the coolest apartment among my friendship circle – shiny, modern and with a massive balcony that had a view to die for.
During one of the commercial breaks that night, an advertisement for a mortgage brokerage chain caught my eye. It was targeted towards first homebuyers, who at that time were firmly in the grips of FOMO – fear of missing out – driven by a boom in almost all capital city markets.
The ad talked up the virtues of owning your own home and the company’s ability to find a loan that was perfect for would-be first homebuyers.
I was intrigued. I went to the website, browsed some of the materials and eventually booked an appointment to see a broker. When he came around a few nights later, we spent two hours going through all of my finances – my wage, my expenses, what I could cut back on, the gap left over at the end of the day and therefore the type of repayment that I could reasonably afford.
From there, he was able to calculate a borrowing amount and match it against lenders’ servicing calculators to see if I was a reasonable prospect. I was.
About five months later, I was moving in to my first place. And I was smitten. It wasn’t my dream home by any means but it was a good start. I was excited about the future and the fact that I had cracked the market. I had done it! And in a boom!
Despite how I’ve simply described it here, the process wasn’t smooth sailing in the slightest. There were false starts, anxious moments and lots of shattered hope moments.
For one, the bank was tough to woo. This is despite the fact that I was well in the pre-GFC lending climate when banks seemed to be throwing cash at people. Alas, they wanted to see just about every bank statement I’d ever been issued, closely queried a late mobile phone bill payment from when I was 18 and had long discussions with my boss about the stability of my part-time job.
And that was the seemingly easy part, compared to the actual search for a property. It was overwhelming, daunting and just a tad confusing. I didn’t know what a body corporate was, let alone strata fees. I thought conveyancing related to checking the structural integrity of a fence – I have no clue why. And I didn’t know that council rates for units were cheaper than houses.
All I knew was that I could afford the mortgage repayments on something priced up to a certain amount. Armed with that information and the guidance of the fairly supportive broker, I set out to begin looking.
I realised very quickly that I had zero chance of affording a property in the areas I wanted to live and knew well – next to the CBD, in entertainment and lifestyle hubs… basically the places that were cool. So, I moved further out.
In that next ring, I’d show up to an open home to find a line out the door and nearly around the block. Investors were extremely active and moved fast on anything with promise. I on the other hand was keen to take it slow, so by the time I tossed up the pros and cons of a certain place and phoned the agent to book a second viewing, it was usually gone.
After a month or so of that, I moved out a bit further again to a suburb that was nice but not quite experiencing the same frenzy as localised pockets I’d previously concentrated my focus on.
I came across a property that ticked most of my boxes and I wanted it. I made an offer for my absolute ceiling – a rookie error – and expected good news. I didn’t get it. My offer was rejected and, without any room to move, I had to begin looking again.
And so I did. There were a couple of others that interested me so I went through the process of acquainting myself with both the properties and the areas they were in. I wanted to be sure.
It was on the way home from an open inspection a few weeks later that I drove by the place I’d originally fallen in love with but failed to land. There was a new realtor sign out the front. Excited, I phoned the number, confirmed it was a new agent for the same place, made my original offer again and waited.
A few days later, it was accepted. I was thrilled. But, like with the finance preapproval, buying a home wasn’t the end of the story.
Oh no. It was just the beginning. For a couple of years, until I was more established in my career of choice, got my head around the machinations of my personal finances and had scored a few pay rises at work, life was financially difficult.
I had to forego regular nights on the town. Takeaway became a luxury rather than the norm, which it had been for me. A daydream about a trip back to New York rapidly became a fantasy. I gave myself several self-taught crash courses on budgeting. I started shopping at Aldi.
Compared to my mates, I was dull. They were off overseas twice a year or at the clubs every weekend. They got loans for new cars and lived in the city or trendy surrounding suburbs. Few ever came “all the way out” to my place to visit, even though it was only eight kilometres from the CBD!
But that sacrifice paid off. I made a healthy equity gain thanks to some minor improvements and capital growth, and used it to leapfrog into my second investment. And that’s where my obsession began.
That was my first time. Let’s recap:
- Getting finance was a bit of a battle.
- Competition from investors and other established homebuyers was fierce.
- Prices were rapidly rising.
- Affording a home in the trendy areas I loved was impossible.
- I had to move a bit further out and lower my expectations.
- The few years that followed needed a new level of financial discipline and sacrifice.
Does that scenario sound familiar? Like now, cracking the market as a first-time buyer wasn’t easy. But that’s how it goes. I don’t think it’s any more difficult these days to get into your first place because owning your own home has never been easy and never will be. It requires sacrifice, determination and a bit of responsibility. Acquire those qualities and acquiring a first home will become that bit easier.
Shannon Molloy is the deputy editor of Australian Property Investor magazine, www.apimagazine.com.au