How much Geelong first-home buyers really need for deposit

While Geelong’s typical home deposit hits a staggering $104,000, savvy first-home buyers are discovering entry points for less than a Toyota Corolla.

Geelong first-home buyers are getting their foot on the property ladder with less money saved than they’d need for a cheap new car.

New analysis shows the 20 per cent deposit preferred by most banks is now $104,000 for the region’s typical home.

But buyers willing to head to the cheapest spots around the city and use the federal government’s First Home Guarantee can secure properties with as little as $20,000 in up-front costs.

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Even without the government’s guarantee, which knocks out having to pay lenders mortgage insurance, the buy-in price for units in areas such as Herne Hill, Geelong West and Whittington, can be up to $46,000 for a first-home buyer, according to data from MCG Quantity Surveyors.

With the government guarantee, the buy-in cost is less than $100,000 in 36 suburbs for first-home buyers with as little as a 5 per cent deposit.

Among that are 22 areas where the median house or unit price is lower than $650,000 and the buy-in cost as little as $17,000.

Geelong buyers advocate Tony Slack said there had been a dramatic swing towards townhouses in established suburbs as first-time buyers sought to secure an affordable edge.

The two-bedroom unit at 1/16 Cornish Ave, Belmont, is listed for sale with price hopes from $530,000 to $560,000.

“It’s been a bit of a dramatic swing and it’s because the market realises it’s not going to get more affordable,” Mr Slack said.

“We’ve had three interest rate cuts already in the past few months. I think they realise there’s going to be more competition out there.

“The units make a really sound choice for the fact they’re in the lifestyle suburbs – that is close to cafes, shops, transport, and the low maintenance aspect.”

Mr Slack said the mid-size units are up to 30 to 40 years old and are brick, which means lower maintenance costs over time.

“That’s where we’ve seen the swing away from older homes on land, the 60 to 80-year-old weatherboards predominantly on larger allotments,” he said.

The inner-to-middle ring suburbs that buyers are targeting include Belmont, Herne Hill, Hamlyn Heights, East Geelong, Newcomb and St Albans Park, Mr Slack said.

Cheapest SUBURBS up-front cost to buy A HOUSE

Source: MCG Quantity Surveying, PropTrack. Up-front purchasing costs include deposit, lenders mortgage insurance and stamp duty were applicable, calculated at median house price.

New realestate.com.au data reveals higher demand for properties in regional cities than last year, lead by a 125 per cent jump for units in Belmont and 88 per cent in Newcomb.

GSE Finance partner Matt Turner said the First Home Guarantee provided access to cheaper finance on top of helping people save a deposit faster and avoid paying lenders mortgage insurance.

The two-bedroom unit at 1/9 Heyers Rd, Grovedale, is listed for sale with price hopes from $495,000 to $525,000.

“It’s allowing potential buyers access to cheaper finance because they’re not deemed as risky for the lenders to offer more competitive interest rates so their affordability is improved.

“Secondly, they’re avoiding that lenders mortgage insurance, which can be up to $50,000 but is typically around $10,000 to $15,000.”

Mr Turner said first-time buyers were still honing in on homes priced under $600,000 to avoid stamp duty.

But more buyers were turning again to new constructions in areas such as Armstrong Creek, Lara and Curlewis, where buyers also accessed a $10,000 building grant, Mr Turner said.

Cheapest SUBURBS up-front cost to buy A UNIT

Source: MCG Quantity Surveying, PropTrack. Up-front purchasing costs include deposit, lenders mortgage insurance and stamp duty were applicable, calculated at median unit price.

“If we’re talking 12 months ago, the value proposition was with established homes because it was a weaker market. There was a lot of stock and you could pick up things pretty easily.

“Now it’s a bit more competitive they’re looking towards building as there is still plenty of titled land around so they’re not having to wait (for the land).”

MCG Quantity Surveyors director Mike Mortlock said even saving up a much lower deposit was becoming a challenge at current prices.

“It’s been made even harder by the high cost of living,” he said.

The two-bedroom unit at 5/6 Drysdale Ave, Newcomb, is listed for sale with price hopes from $499,000 to $545,000.

“Most people are spending their salaries to cover their living expenses. To start really building up their savings, they would need a big pay rise.”

But Mr Mortlock said “prices are just going up so much faster than wages.”

“And until we build more housing, we’re going to be talking about the same thing in a few years, only the problem will be even worse,” he said.

Mr Mortlock said first-home buyer incentives, such as the federal shared equity scheme and other state-based programs, were a good development “in theory” but in practice would likely exacerbate the deposit burden by lifting prices.

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