One in eight Australian first-home buyers is looking at purchasing in another state as well as the one they live in.
New research by Finder.com.au reveals the shock stat that comes on the heels of a surge in interstate moves, with Australian Bureau of Statistics data showing Melbourne alone lost 61,000 people in the year to June 2021.
With unprecedented scope to work from home giving all homebuyers, not only investors, reason to look outside their own backyard, the experts have some surprising insights into the benefits – and potential drawbacks.
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A few years ago Finder home loans expert Richard Whitten moved from Sydney to Melbourne, with the price of property a major motivation.
“Comparing states can make a huge difference in terms of what you can afford to buy,” Mr Whitten said.
“And with a higher value, you are paying more for the property costs, like stamp duty. Plus, if you borrow more, you repay more interest.”
With first-home buyers now heavily focused on the upfront costs of property purchases that escalated substantially with house prices in Sydney and Melbourne, Mr Whitten said the real surprise in its survey of 1001 Aussie first-home buyers was that the figure was highest in South Australia at 17 per cent. This trumped the national average of 13 per cent.
There could be even more financial motivation to hop a border during a home hunt as interest rates rise and accentuate the benefits of a smaller mortgage. “It’s possible we’ll see people looking to more affordable areas or states,” Mr Whitten said.
Real Estate Buyers Agents Association of Australia president Cate Bakos said with employers more open to working from home, she was seeing more buyers pursue a dream lifestyle across state borders.
Ms Bakos said it was surprising how many people were influenced to purchase in a regional area, or even interstate, by what they saw on social media. “It’s a bit like when Eat Pray Love came out, and everyone wanted a Tuscan castle,” she said.
Real Estate Institute of Australia president Hayden Groves said an interstate purchase was “quite a sensible idea as it diversifies your portfolio”, but you could fall foul of legal differences in some other states.
For example, if you had only bought in Melbourne you would assume you had a three-day cooling-off period – though that rule does not apply in Victoria if you buy within three days of a property’s advertised auction date. In Perth, there is no such thing as a cooling-off period.
Likewise, states have different support schemes. From July 1, off-the-plan apartments in Perth that cost less than $500,000 will come with a full stamp duty rebate.
New apartments in the City of Melbourne municipality worth up to $1m that were completed more than a year ago, but have never been sold before, incur no stamp duty costs – though only until the end of June.
Mr Whitten said that first-home buyers had different entitlements in each state, particularly around stamp duty. “Though $10,000 tends to be the average for most of the first homeowner grants,” he said.
There might also be different rules if you miss settlement, with many states subjecting late buyers to penalty interest payments – but Queensland allows a vendor to claim the deposit and resell.
Ms Bakos warned that in Tasmania authorities expected stamp duty to be paid within three months – even if settlement came after this.
IS IT FOR YOU?
Mr Groves said buying interstate meant “a bit more time doing your research”. “Ideally spend some time in the communities you are thinking of buying in,” he said. “Speak to different agents and go to a range of properties to see who else is looking.”
Ms Bakos advised starting that research with yourself.
“People often make a big move, and then come back because they miss having family support for their kids,” she said. “And longer term you might find you price yourself out of being able to buy back into your original city if you put all your capital into another city.”
Despite this, she said now was a safer time to buy interstate, with high rental demand making it more likely you could rent rather than sell if your move did not work out as planned.
WHO TO TALK TO
Ms Bakos advised finding a local expert for contracts in your preferred state and suggested having someone on the ground give you a run down on areas you don’t know well.
“Check with a property manager what you are going to get in rent, and what sort of tenant you will get, or if there are problems in a particular street,” she said.
Mr Groves said most investors and homebuyers would look to home price growth to underpin their decisions. REIA figures show Hobart’s median house price rose an “unsustainable” 31.5 per cent in the past year, though Mr Groves warned it could lose ground in the next year.
“But there are very attractive yields in the short-term in some capitals, which is most notable in Perth and Adelaide at the moment,” he said. “And a better yield might give you more of a buffer as interest rates rise.”
While investors would want to check local vacancy rates, Mr Groves also advised they should take note of local tenancy laws, with Victoria now regarded as the nation’s most favorable for tenants.
Finally, while population growth has helped boost markets in regional NSW and Queensland recently, he warned surges could work in both directions with the end of mining booms slashing property values in Western Australia and the Northern Territory in recent years.
SOUTH AUSTRALIA: 17%
WESTERN AUSTRALIA: 6%
Finder research showing the percentage of first-home buyers looking interstate
HOW DOES THE CAPITAL IN YOUR STATE RATE
Median house price: $1.36m
Median unit price: $785,000
Median house price: $980,000
Median unit price: $560,000
Median house price: $911,375
Median unit price: $621,000
Median house price: $736,000
Median unit price: $540,000
Median house price: $715,000
Median unit price: $440,000
Median house price: $610,000
Median unit price: $385,000
Median house price: $582,000
Median unit price: $390,000
Median house price: $535,000
Median unit price: $402,000
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