In the media: Challenging rental conditions are pushing many to buy their first home sooner

In the media: Challenging rental conditions are pushing many to buy their first home sooner

Extremely competitive conditions in Brisbane’s rental market have led to unprecedented rent increases.

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“The escalating cost of renting in Brisbane is driving many renters to buy their first homes sooner than they are ready, a local buyers agent revealed.

Brisbane’s limited rental stock has failed to keep pace with the demand, thus resulting in a highly competitive market and a record-long stretch of rising rents. 

According to Domain’s latest rental report, house rents in the River City rose 9.1% over the past year, while unit rents increased 16.7% following the 10th consecutive quarter of growth. 

Brisbane house rents have reached a record-high median of $600 per week in the December quarter. 

Similarly, units have continued to produce record-high rents at $560 per week.

Lauren Jones, a Brisbane-based buyers agent, said the influx of new residents – both from overseas and interstate – was the driving force behind this unprecedented rental growth.  

“I really feel for Brisbane renters, because the market is so competitive right now. Rental inspections often attract dozens of tenants and rents keep skyrocketing,” she said.

Finding properties for rent in the Queensland capital is no easy feat, given its vacancy rate remains at a critical 0.9%.  

“The renters I speak with are often quite stressed, as they feel they have limited control over their living situation,” she said.

Challenging rental conditions are pushing many renters to try to buy their first home sooner than they might have planned, according to Ms Jones.

The latest data from the Australian Bureau of Statistics (ABS) revealed a seasonally adjusted 10.8% increase in loan commitments in November for owner-occupier first home buyers in Queensland. 

“But then they get confronted with a property market where, again, the odds are stacked against them,” Ms Jones said.

The supply-demand imbalance is not making it easy for aspiring homeowners to enter the property market. 

Total property listings in Brisbane saw a month-on-month decline of 8.9% in December, and an even sharper drop of 13.3% compared to the previous year, data from SQM Research revealed. 

“The lack of available properties on the market is becoming a major obstacle. Buyers are finding themselves in fierce competition for the limited listings that do become available, pushing up prices,” Ms Jones said.

When is the right time to buy a home?

A recent report by ANZ-CoreLogic showed housing affordability worsened in 2023, deteriorating on three fronts.

Surging rent and housing values coupled with a high cash rate that pushes increased cost of debt have been making it more difficult for first-time buyers to purchase a property. 

“While first-time home buyers encounter numerous challenges in acquiring their initial homes, it is crucial to be well-informed about the optimal timing for making this significant purchase when the opportunity arises,” said Dr Peter Swan, Professor at the School of Banking and Finance at UNSW Business School. 

Professor Swan said the good time to buy a home is “when house prices are relatively depressed” and the buyer can raise the deposit and meet interest payments on their home loans.

For Dr Nalini Prasad, a senior lecturer in the School of Economics at UNSW Business School, having enough savings built up is also a vital consideration before making any property-buying decision.

ANZ-CoreLogic revealed saving for a 20% deposit would require putting away money for an average of 9.7 years.   

“A good time to buy is after people have built up savings, and when interest rates are low and house price growth is cooling,” Dr Prasad said.

However, house price changes are hard to predict and would highly depend on the economy.

“Inflation rates remain well above Reserve Bank guidelines of 2-3%. Should the Reserve Bank continue to raise interest rates to precipitate an economy-wide decline, combined with a fall in new immigrant arrivals, then we could see a decline in house prices,” Professor Swan said.

Ms Jones’ advice for renters: “Give yourself a longer timeframe than you may expect.”

She also advocates for getting a pre-approval, which indicates that a lender approves a buyer to borrow up to a certain amount depending on their income, credit history, and other circumstances.

“The property market, like the rental market, is challenging right now, but it’s not impossible,” Ms Jones said. 

“It’s natural to feel stressed, but if you feel yourself getting desperate and about to buy something compromised, reach out to an expert like a buyer’s agent. Don’t rush in as it can be a bad financial mistake.””