Property prices are falling, so where have Sydney’s first home buyers gone?

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But even if prices fell 15 to 20 per cent nationally, as Oliver predicts, it would bring prices back only to December 2020 levels, when poor affordability was already an issue. Prices would need to drop at least 25 per cent for a broad improvement in affordability, a recent report found, a drop the report’s authors did not expect.

Oliver added that the government, as in previous downturns, may look to reintroduce incentives such as HomeBuilder to support the market if the economy slowed.

First home hopeful Lewis Alha, pictured outside his parent’s home, knows rising interest rates will make it hard to take advantage of lower property prices.

First home hopeful Lewis Alha, pictured outside his parent’s home, knows rising interest rates will make it hard to take advantage of lower property prices. Credit:Brook Mitchell

Lewis Alha, 24, is among aspiring first home buyers nervously watching the market. He lives with his family in Croydon Park and is hesitant to buy just yet, turning his focus instead to increasing his savings. He wants to purchase by mid next year, however, when he thinks prices will reach their lowest point of the dip.

Alha plans to use the government’s Home Guarantee Scheme, which would allow him to purchase with as little as a 5 per cent deposit.

“While the prices of property are declining I don’t know if it’s going to be better to wait in the long term for them to really drop because, as they drop, the interest rates are going up. At the moment I’m trying to wait it out … but I might miss the boat,” he said.

Less borrowing power, and the prospect of higher mortgage repayments, have also shifted his focus from newer two-bedroom units costing about $700,000, to older, smaller units asking $500,000 to $550,000. But many options were up in the air, he said.

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Alha’s mortgage broker, Joseph Daoud, founder of It’s Simple Finance, said many first home buyers were in a similar boat. Uncertainty about how high rates would go, and reduced borrowing power, were the biggest factors, but expectations of further price falls were also causing hesitation. Affordability constraints also remained, given strong price growth in previous years.

“You have some savvy first home buyers at the moment who are placing themselves very well, but that’s a fraction of the market, say two out of 10 buyers; the rest are scared,” he said.

Daoud said the rising cost of living, particularly increasing rents, was making it harder to save a deposit.

Buyer’s agent Michelle May, principal of the eponymous buyer’s agency, said some first home buyers were striking good deals. Many, though, were nervously watching the market.

“There’s also not a lot of stock, and a lot of it is investors offloading stock that is not renting, and that’s not the stuff we want to buy,” she said.

May urged buyers against trying to pick the bottom of the market, as they were bound to miss it, and instead suggested focusing on finding a quality home.

Buyer’s agent Lloyd Edge, managing director of Aus Property Professionals, said some first home buyers were delaying purchasing while others were changing strategy and looking to buy investment properties in more affordable regional markets.

“Although the market is coming off, they can also borrow less, so it’s not really helping them,” he said.

Edge said interest in the Home Guarantee Scheme had fizzled out among his clients, but help from the Bank of Mum and Dad was still widespread.

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