Aspiring home owners can sense an opportunity.

As banks warn of price falls of up to 32 per cent, first-home buyers stand ready to pick up a bargain.

Almost nine out of ten (87 per cent) believe economic downturns present a “good” opportunity to break into the property market, according to ME Bank’s latest property sentiment report.

But though it may be a good time to buy for those with secure employment, analysts have warned that some will miss out by attempting to time the market.

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First-home buyers should not be ‘paralysed’ by FOMO

Buyer’s agent and CEO of propertybuyer.com.au Rich Harvey said now is an “opportune time” for first-home buyers to bid on properties, but also noted many are “nervous to pull the trigger” in fear of missing out on a bargain.

He warned more competition could appear in September because of a combination of greater certainty over Australia’s economic health and lower house prices, which may stimulate buying confidence.

“The main piece of advice for first-time buyers is to do their research, but don’t let it get you into a paralysis of analysis where you may put your purchase on hold for months,” Mr Harvey said.

“Right now there isn’t a large volume of stock to choose from, but if you’re standing in an auction in June or July, you’re potentially only bidding against one or two other parties.”

Prospect of downturn opens up opportunities

Scarlett Koehne, a 29-year-old voiceover artist and freelance television producer, has rented an apartment in Melbourne’s south-east with her partner, James, for the past two years.

Both have ambitions to start a family, but their search for a property on a large block of land in the city’s inner north prior to the coronavirus outbreak appeared fruitless.

Most of their preferred listings were hundreds of thousands of dollars out of reach.

With hopes of securing a home within 12 months, she said the prospect of a double-digit pricing crash and less competition from developers and overseas investors had broadened their horizons.

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The couple’s property hunt initially included suburbs such as Coburg and Brunswick West, but their attention has since shifted to inner-suburban locales like Clifton Hill and Northcote.

“I thought we might have to settle for our first property that didn’t tick all the boxes to fit our price range, but as the market changes, we may find something closer to our ideal home,” Ms Koehne told The New Daily. 

Purchasing a property is something I’ve thought about since I was a 10-year-old kid with pocket money, and I’ve always put money away for a downpayment, so it seems like a blessing in disguise if the market drops.”

Rein in those too-great expectations

CoreLogic property analyst Eliza Owen said first-home buyers should temper expectations of significant pricing falls across the board.

She said worst-case scenarios predicting declines of more than 15 per cent hinge on a wave of distressed sales and mortgagee-in-possession events.

Ultimately, this would harm the major lenders.

“What we’ve seen historically throughout housing market downturns is that institutions are reactionary, they don’t just sit back and do nothing,” Ms Owen told The New Daily. 

“That’s why we’re starting to see banks offer switches to interest-only loans or extending those periods, because it’s in their interest to make sure people can continue with repayments and hold on to their asset.”

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Meanwhile, comparison site ratecity.com.au has warned those jostling to secure one of 10,000 new places on the federal government’s First Home Loan Deposit Scheme from July 1 to be mindful of the risks.

Ratecity.com.au research director Sally Tindall said that while the scheme guarantees first home buyers 5 per cent deposits, they could be “staring down the barrel” of owning an asset with negative equity.

“People who borrow with a wafer-thin deposit might get onto the property ladder sooner,” Ms Tindall said.

“But they are likely to pay higher monthly repayments and pay tens of thousands in extra interest over the life of the loan.”