Westpac’s latest Home Ownership report reveals 44% of Australians are planning to purchase a new property in the coming five years – up 9% in six months.
However, would-be first time buyers expecting to get their foot on the ladder slipped lower, with the majority (86%) blaming the cost of living crisis.
It comes after a bout of inflation forced the Reserve Bank of Australia (RBA) to embark on its fastest cash rate hiking spree on record in 2022.
The cash rate – which majorly influences interest rates – currently sits at a 12-year high.
For employee households, interest costs on home loans more than doubled between December 2021 and December 2023, Australian Bureau of Statistics indexing finds.
Meanwhile, serviceability tests and soaring house prices have likely also put a dampener on those looking to buy for the first time.
Three quarters of first home buyers are now willing to purchase outside the areas they initially desired in a bid to make their budget stretch further, according to 2,000 Australians surveyed by Westpac.
Around half, meanwhile, are willing to consider rentvesting or plan to purchase with a partner (or both).
“While some buyers have paused their housing plans, the intention to buy remains strong and prospective buyers are becoming more ruthless with their goals,” Westpac managing director of mortgages Damien MacRae said.
“Buyers are casting their expectations wider, willing to compromise on location and are forgoing everyday luxuries like food delivery.
“They are also more inclined to relocate and move to apartment living.”
Westpac found most homebuyers are now willing to compromise on the type of property they purchase.
Houses are still the most popular type of dwelling among would-be buyers.
However, the portion looking to buy a house has dropped by 5% since 2021 while those preferring to purchase an apartment or unit has jumped 7%.
Simultaneously, the number of buyers hunting for a townhouse have doubled and those searching for a house and land package have quadrupled.
Half of first home buyers willing to pay LMI
The big four bank also found that nearly half (47%) of homebuyers are willing to fork out for lenders mortgage insurance (LMI) in order to purchase their first property.
Home loan lenders will typically demand a borrower pays LMI if they don’t have a deposit equivalent to 20% of a property’s value.
That means a person buying a $600,000 home would need $120,000 saved up to dodge the cost, which can be tens of thousands of dollars in some instances.
However, it can also see a buyer enter the property market faster, or allow them to buy a more expensive home than their deposit would otherwise allow.
Particularly, as it’s been found that the majority of first home buyers are unable to save a deposit large enough to dodge the cost.
Read more: The rent trap: Most first home buyers can’t save a 20% deposit
“Lenders Mortgage Insurance is more than just a financial safeguard for lenders,” said Greg McAweeney, chief commercial officer of LMI provider Helia.
“Paying the LMI fee is an option that could help home buyers buy their dream home sooner.
“By shedding light on the advantages of LMI, we aim to empower more aspiring home buyers to make choices that align with their lifestyle aspirations and financial circumstances.”
The LMI provider released a new educational video on the benefits of using the insurance product on Wednesday.
Image by Soroush Karimi on Unsplash
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