First Home Buyers Guide for NSW
Finding and buying your first property in NSW
Buying your first home is never easy, particularly in New South Wales, where home values tend to be higher than anywhere else in the country. How do you go about finding and buying your first property in NSW?
The different ways to buy property in NSW
A standard residential property transaction is known as a Private Treaty sale. This is when the vendor, or home owner, sets the price they would like to sell their property for and their real estate agent negotiates individually with prospective buyers to achieve a sale as close to this price as possible.
Buying at Auction
An auction is a public sale conducted by a licenced auctioneer and is governed by strict rules. There is a reserve price, which is essentially the minimum the home will sell for - if bids surpass the reserve and you are the highest bidder, you have to sign the contract right there and then.
Buying by Tender
Buying NSW property by tender is a process wherein you submit a single offer, usually accompanied by a 5 or 10 per cent deposit, and it is accepted or rejected by the vendor.
Buying property off the plan
When you buy property off the plan, you are paying for something that hasn't been built yet. The home can end up slightly different from what you were told. However, it does offer you a lower price point than many other properties.
For more detailed information, the Housing NSW A-Z Guide to Purchasing Your Home
is an excellent resource. Using a real estate agent is also an important part of this process - your local LJ Hooker representative is ready and willing to help you find your first NSW property.
Working out how much you can afford
The first questions for many people buying their first property in NSW will be organising a budget. The Australian Securities and Investments Commission's MoneySmart
website is a good place to start working out a savings plan, as well as building it up.
Getting a home loan you will usually need 10 to 20 per cent of the full purchase price to secure a home loan comfortably. With a low deposit, you will incur an extra cost in lenders mortgage insurance, which protects the lender if you default on the loan.
LJ Hooker Home Loans is an excellent source of many home loan products, with a wide range of mortgages tailored for first home buyers.
The NSW first home owner grant
Just like in any other state or territory, NSW first home buyers can qualify for the first home owners grant (FHOG). What follows is a summary, with more information available at the Office of State Revenue.
As of January 1, 2016, the amount for the NSW first home owner grant is $10,000. If your transaction occurred prior to this, then you would be eligible for $15,000. The first home you buy also has to be a new property, or you may not be eligible.
A significantly renovated or rebuilt home can qualify for the grant, as can a dwelling that is replacing a home that has been demolished. For more details, you can find the application form here.
Hidden costs of buying your first home in NSW
As a first home owner, you will also have to pay a significant number of fees and taxes that you may not have encountered before.
- Stamp duty is a tax levied by the NSW Government. It is based on the value of your property and can be significant - between $8,990 and upwards of $56,990. Click here for the NSW stamp duty calculator.
- Land tax is paid on December 31st every year, and applies to all homes worth more than $482,000. This costs $100 plus 1.6 per cent of your home's value up to the premium threshold, which is $2,947,000. Above this level, land tax is $39,540 plus 2 per cent of the value above this mark.
- Legal fees will be between $1,500 and $3,000 depending on the complexity of your contracts.
- Loan application fees can range from nothing to $1,000 - sometimes this is waived by the lender.
- Independent valuers fees - you will require an independent valuer to value the property you are planning on buying. This is generally $300 to $500.
- Lenders mortgage insurance - if borrowing more than 80 per cent of the property's purchase price, you'll need LMI. This is a one off premium to cover the lender should you default on the loan. This varies but allow for around $10,000.
- Registration of title - you are required to register the title with the NSW state government for $75.
- Building, Pest and Strata - you can expect to pay around $300 to $400 for a building or pest inspection, and $200 for a strata report.
- Council Rates and Strata Fees - these commence from settlement. Allow for an extra $500 to $800.
- A solicitor, conveyancer or the team at LJ Hooker home loans can help NSW first home buyers understand these fees, and organise them without stress.
Finding your first home in NSW
Property reports and research
Doing due diligence on the property market gives you important understanding of where you can buy and how much it will cost.
From there, you can settle on what kind of property to buy - existing homes, off-the-plan units, apartments or houses, or perhaps something else altogether. The Department of Housing's A-Z of Buying
is also a useful guide.
Where to look for a first home in NSW
As for the actual property search in NSW, contacting your local LJ Hooker real estate agent is a great place to start. They know the local market intimately and would love to help you find your dream home.
As well as the sites like Domain mentioned earlier, local and state newspapers can be very useful for finding more information. More affordable suburbs tend to be on the fringes of the city or in regional areas, but the advice and experience of a professional agent can help you find a first home in places you had not thought to look.
Importance of inspections
Make sure you spend time thoroughly inspecting the property. Here are some inspection guidelines to help you when you walk through the property. It is also recommended to have a pre-purchase building / pest inspection on all properties you are serious about buying as it can save you thousands in the long run.
Contracts of sale
The contract of sale is a crucial document to look over before you buy your first home in NSW. It will include the following information on your desired property:
- Zoning information and sewerage details,
- Title information, including documents from Land and Property Information NSW and relevant conveyancing documents,
- Any information on restrictions placed upon the property,
- Relevant strata information,
- Details on any applicable cooling-off period.
Contracts of sale are exchanged when an agreement to buy your first property is reached, at which point you will deliver a deposit of 5 to 10 per cent of the home's value to the vendor.
Finalising the sale
If you have found a property you love and want to make an offer, make sure you have carefully considered how much you are willing to pay, how much you can afford, whether you go in with your highest price or prefer to go in lower.
All offers and counter offers must be made in writing and signed by you. The agent is legally obliged to pass on all offers to the vendor as soon as possible. The seller then decides whether or not to accept or reject the offer. In many cases, the sale price is negotiated until both parties agree to a final price. If your offer is accepted you have a five day cooling off period during which you can withdraw from the sale.
To participate in a NSW auction, you must register with the vendor's agent and you will be given a bidders number. The auctioneer oversees the process and all bids from potential buyers are recorded. Before the auction commences the seller will normally nominate a reserve price and if the bidding continues beyond the reserve the property is sold at the fall of the hammer.
The seller is also permitted to make one bid called a vendor bid which the auctioneer will announce. If you are the highest bidder, you have to sign the contract of sale right there and then and pay your deposit (normally about 10 per cent). Also be aware, there is no cooling off period.
Contract exchange and settling the sale
After buying the property either via private treaty or auction, signed sales contracts are exchanged between the vendor and the buyer. Private treaty sales often have a 5 day cooling off period for the buyer, however there is no cooling off period for properties bought at auction or for the sellers of the property. It is recommended you consult a solicitor or conveyancer during this process.
Settlement is the conclusion of the sale transaction, and usually takes place about 6 weeks after the contracts are exchanged.
For any further questions or to find out how you can get into the NSW property market as a first home buyer, contact your local LJ Hooker representative. The process can be overwhelming, so arming yourself with professional help is highly recommended.