The HIA-CBA First Home Buyer Affordability Report revealed a 14.6 per cent improvement in affordability for the March 2009 quarter making housing the most affordable it has been for seven years. The boosted First Home Buyers Grant (FHBG) of at least $21,000 combined with historically low interest rates has made it a very attractive time to enter the real estate market. The increased demand from first home buyers has seen real estate prices increasing at the lower end of the market while the upper end (property over $700,000) has suffered falls resulting in average home prices falling 6.7% in the year to March.
However first home buyers are advised to proceed with caution. Unemployment is tipped to increase to 8.25% by 2010 impacting the ability of those who lose their jobs to meet mortgage repayments. Official interest rates are at 3.0% but will rise in the coming years as the Australian economy picks up and moves out of recession.
Faced with a gloomy economic outlook many banks have tightened their lending standards making it harder to get a loan. Many lenders require 10%-20% deposits before issuing a new loan something which has been described as a “safety valve being written into the loans”. However in reality the safety valve will offer increased protection to the banks not the home owner. A larger deposit means that should a homeowner be unable to keep up repayments and the property is repossessed the bank can still recover the amount secured on the property even if the home has fallen in value.