Crisis over for buyers who get into the home market
Cutting down on holidays and weekend drinks with friends to keep up with the mortgage on his first home wasn’t always easy for accountant Hadi Prayoga.
But he doesn’t regret the sacrifices that enabled him to get into the Sydney property market and build wealth in the city’s housing boom, instead of paying rent that he sees as “dead money”.
Mr Prayoga, 30, is part of a generation of post-crisis home buyers that the Reserve Bank singled out this week as being in better financial shape than renters once they managed to take the plunge.
The RBA acknowledged worries about rising levels of household debt — even as potential interest rate rises loom that could put pressure on stretched mortgage holders — while also highlighting surprising bright spots in first-home buyers’ financial health.
Those who bought their first home between 2008 and 2014 were more likely to be satisfied with their financial situation than renters, the RBA said in a report titled “The Property Ladder after the Financial Crisis: The First Step is a Stretch but Those Who Make It Are Doing OK”.
Post-crisis first-home buyers were also more likely to feel satisfied with their finances than those who bought their first home before 2007, the RBA said.
They were less likely to make late mortgage repayments or ask for financial help than first-home buyers in previous years.
After buying his two-bedroom apartment in Maroubra, in Sydney’s southeast, with the help of his parents in 2009, Mr Prayoga worked hard to pay down his debts to the bank and his family.
He is glad to have made the decision to buy rather than rent, and now to fund a start-up business he is selling his home through Century 21.
“I grabbed this opportunity when I was 22 and now that I need more capital I have it,” Mr Prayoga said. “I was quite lucky because I was being guided by my father … Now that I’m paying off my own mortgage I don’t see it as dead money.”
First-home buyers have been coming back into the market more recently after east coast state governments offered stamp duty savings, with ABS data showing the proportion of loans to firsthome buyers hit its highest point in four years in July.
Century 21 agent Nick Pappas has noticed a rise in first-home buyers “genuinely looking”. “With what the government’s been doing that’s probably helped them to get into the marketplace,” he said.
The RBA acknowledged the difficulty of getting into the property market. “Our results support the hypothesis that higher hous- ing prices have crowded out potential first-home buyers from the market,” report authors John Simon and Tahlee Stone wrote.
The bank warned that firsthome buyers were taking on more debt than in the past as housing prices had outpaced incomes.
The RBA found that some buyers who received help from their parents were more likely to face cashflow problems than those who had the discipline to save the money themselves.
Australia’s household debt is one factor in focus for the RBA as it prepares to lift interest rates from historic lows. Rates are likely to start rising around the December quarter of next year, said AMP Capital chief economist Shane Oliver and this will “have a further dampening impact on the property market”.
Hadi Prayoga outside his Sydney apartment: ‘Now that I’m paying off my own mortgage I don’t see it as dead money’