AS low interest rates prompt a fresh surge in real estate activity, a Battle Royale is looming between first-home buyers and property investors.
Sadly for the first-home buyer crowd, it’s a one-sided contest. Low interest rates help both parties with their repayments, but investors typically have more financial firepower when it comes to a bidding war.
Data released this week by mortgage broker AFG shows that investors snapped up between 28 per cent and 50 per cent of all mortgages processed in August, depending on which state you live.
And the RP Data-Rismark Home Value Index reported the strongest quarterly gain in house prices in four years.
It’s good news for sellers, but not so great for buyers who have been scraping a deposit together and now must fight cashed-up investors for properties, plus a growing number of wealthy foreign buyers.
So in the interests of helping the underdogs, here are some ways that first-home buyers can compete in the real estate market.
Firstly, get pre-approval for a loan. If a seller has a choice between a pre-approved offer or one that is subject to finance, it’s no contest.
It’s also important to think about supply and demand. If there is high demand for an area or property, you’re going to have to pay more and battle others for it. In many cases taking that first step on the property ladder makes more sense in an area where there is abundant supply and lower demand. You can always trade up later once you have built some equity in your property.
Remember that most property investors think with their heads rather than their hearts and will seek simplicity in their purchase. That means first-home buyers may have a better chance at grabbing a bargain if they target properties that need a little renovation work to get them into good shape.
Search for opportunities before they get listed by building a network of real estate agent contacts. Property experts suggest always making the first offer and asking the agent for the opportunity to make a counter offer.
Finally, take emotion out of your buying decisions, just like good investors do. New properties will always be popping up.