Why 2024 Could Be The Year Of The First Home Buyer

February 9th, 2024 - by Brad Gillespie

The last few years haven't necessarily been great ones for first-home buyers.

Rising property prices, high-interest rates and the growing cost of living have made it more difficult to get on the property ladder for many people.

We’re hopeful that this year, things might begin to change.

After all, the NSW government has increased the threshold on who qualifies for first-home buyer incentives - bringing many more properties within reach. What’s more, interest rates look to have peaked, some apartment prices have remained relatively stable, and the high cost of renting is beginning to make it comparatively attractive to buy in many instances.

With that in mind, here’s why we think 2024 could be the year of the first home buyer in Sydney’s inner city and inner west.

Changes to NSW government incentives on transfer duty

From 1 July 2023, the NSW government widened the pool of properties that qualify for its First Home Buyer Assistance Scheme.

The scheme offers a concession or exemption on the amount of transfer duty (stamp duty) first home buyers have to pay on their first home.

Now, properties under $800,000 qualify for a full exemption from transfer duty, while properties valued between $800,000 and $1,000,000 receive a concessional rate.

This is fantastic news because transfer duty can be a real impediment to getting on the property ladder. Not only is it expensive, it also needs to be paid upfront - and on top of a home deposit.

For instance, if you bought an inner city apartment valued at $800,000 you’d usually have to pay $30,735 transfer duty on it. Under the First Home Buyer Assistance Scheme, you’d pay nothing.

Unlike the First Home Buyer Scheme, which applies only to new builds, the transfer duty exemptions and concessions apply regardless of whether a property is new or established.

Interest rates cuts forecast

One of the main impediments to getting on the property ladder over the past couple of years has been rising interest rates. Between May 2022 and November 2023, the RBA lifted the interest rate 13 times taking the official cash rate from 0.1% to 4.35%.

In the process, it has added hundreds - even thousands - of dollars a month to the cost of servicing a mortgage.

The RBA’s decision to start raising interest rates was aimed at curbing inflation, and the good news is that the latest data shows inflation seems to be coming under control. As a result, economists are forecasting that interest rates will come down by as much as 0.65% by the end of this year. In fact, the banks have already quietly begun reducing rates on their fixed rate home loans, which means they too forecast that the interest rate will start coming down.

Buying vs renting in Sydney’s inner city and inner west

Sydney’s rental market has been soaring since the pandemic. SQM Research data shows the median Sydney asking rent went from $527 in December 2020 to $821 in December 2023 - a rise of 55.8%.

As we have already observed, this means the gap between the cost of renting and the cost of buying could be narrowing, even in the face of higher interest rates. This alone should entice more first home buyers into the market over 2024.

The widening gap between apartments and houses

Another factor that we think matters is that many apartments in Sydney’s inner city and inner west is that apartment prices have become relatively affordable - at least when compared with house prices.

That’s because much of the growth in property prices that has happened post-pandemic has been in houses, which apartment price rises tend to have been more subdued.

Domain recently noted there was a 67% gap between house and apartment prices in our city by the end of last year. Before COVID-19 struck, that gap was just 35%.

So long as first home buyers are prepared to buy an apartment rather than a house, this potentially means many properties in our area could actually be within reach.

Best value suburbs for first home buyers in Sydney’s inner city and inner west

If you’re looking to get onto the property ladder in Sydney’s inner city and inner west, you could have more options that you realise, especially if you choose to buy an apartment. Here are the median one- and two-bedroom apartment prices for key suburbs in our area.

Suburb Median one-bedroom apartment value Median two-bedroom apartment value
Alexandria $880,000 $985,000
Erskineville $750,000 $1,120,000
Camperdown $740,000 $1,200,000
Newtown $650,000 $1,100,000
Marrickville $635,000 $860,000
Redfern $720,000 $1,100,000
Waterloo $640,000 $940,000
Rosebery $664,750 $902,500
Zetland $720,000 $1,005,375

* Source: Realestate.com.au suburb profiles

Want more?

Looking to buy your first home in Sydney’s inner city and inner west? Contact my team today.