The number of first-time property buyers in Australia has soared over the past year.
Indeed, the number of owner occupier first home buyer loan commitments rose 9.3 per cent in a single month to reach 15,205 (seasonally adjusted) in December, which reflected a stagger 56 per cent rise since December the year before, according to the Australian Bureau of Statistics (ABS).
Historically, first home buyers has been counted differently in official statistics than those people who buy an investment property first and remain renting before buying a home to live in.
However, regardless of whether your first property is an investment or a home, the same mindset must be employed to ensure you can build your portfolio from your very first purchase.
Unfortunately, many first-time buyers purchase an inferior property in an underwhelming location.
This can prevent them from upgrading in the years to come or sometimes even make their money back if they had to sell over the short-term.
Working with experts can reduce the risks of making a property purchase blunder of course, but so can understanding these three key concepts as well.
Game of finance
Contrary to popular opinion, successful property ownership is as much about finance as it is about anything else.
That’s because, without access to borrowings, prospective property owners wouldn’t generally be able to buy anything at all!
In rising market conditions, it’s even more vital to understand the importance of finance as well as your loan serviceability assessment to ensure you can make solid offers for properties quickly – but never over-extend yourself financially.
There is a saying that you make money when you buy, which will be blown out of the water if you overpay for a property from the outset.
Location is paramount
Real estate is one of the few holdings where you can directly impact its capital growth, which is generally not possible with stocks or shares.
What I mean by that is properties can be renovated and upgraded to help to strengthen their values over time as well as improve their desirability with tenants if they are rental properties.
However, one thing that can never change is the location of the block of dirt on which the property sits.
Depending on where and what you buy, you may be able to change the dwelling’s location on the block or even build a new one entirely.
But what you won’t be able to change is if the block of land is located on a busy road or is opposite a noisy school, for example.
That’s why desirable locations that may offer leafy surrounds or water views are always in demand from buyers.
Strategy over emotion
The biggest mistake that first home buyers make is purchasing with their hearts instead of their heads.
This can result in them buying a property in the suburb they grew up in, simply because they have happy memories of their childhoods there.
Or, perhaps, they purchase near their parents or their siblings, with little thought about the dynamics of the local property market itself.
While there is nothing wrong with buying near your loved ones, it could be at the expense of future capital growth if the suburb you’ve purchased in doesn’t have many of the fundamentals to create future capital growth.
With once in a generation interest rates likely to be around for a few years yet, first-time buyers have the opportunity to start their property ownerships journeys now.
They would be wise to consider all of the variables, including property investment fundamentals, before doing so.