As we quickly approach the end of 2021, it’s time to set goals and expectations for the year ahead. For some of you, owning your first home may be part of your goals.
I would encourage you to consider the following advice before pulling the trigger on that first home.
Be Prepared For Delays and Potential Overruns
During 2020 and 2021, there was plenty of demand-side incentives that favoured first home buyers. These were in the form of FHOG grants and one-time stimulus packages.
While demand was booming, supply was lacking. There were extensive delays in new construction due to a lack of labour and appropriate materials. As such, the joy experienced by most new homeowners was quickly replaced with disappointment and remorse.
The reality is that these supply problems will persist well into 2022. Builders continue to scramble to alleviate the considerable backlog of new residential construction. That means that any deals signed in 2022 will likely be severely delayed or deferred into 2023. Delays is also bad news for your budget, as overruns and scope creep is likely to arise.
Cut Your Spending To Account for Unanticipated Costs
As mentioned above, there may additional costs arising from your build. To avoid breaking the bank, my advice is that you aggressively re-evaluate your spending.
For example, if you’re currently renting, consider cheaper accommodation or even free accommodation (i.e. living with your folks). While it may be an uncomfortable adjustment, it is a means to an end. Also consider cutting discretionary spend, such as dining out or monthly subscriptions.
Take Ownership Of Some of The Lower Risk Build Projects
For our first home, we installed our soak wells to save money. We did our painting and part of the landscaping. While this was back-breaking work, we saved a lot of money.
My advice is that you shouldn’t believe you are above a certain task. Nor should you think that you lack the time to complete these tasks. Remember that this is your home and you should take ownership of it. That means sacrificing personal time to save in other areas.
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Now I’m bullish on the housing market returning to some form of equilibrium quicker than others expect. However, I believe first home buyers should realistically manage their expectations on schedule, as well as manage their personal finances to account for unanticipated costs.
The content outlined above was written, edited and published by the Lost Realtor. The author has over 20 years or real estate sales and investing experience in the Australian property market. He has held senior positions in Australian building companies, including being the General Manager of the residential sales division of Collier Homes. His qualifications include a Bachelor of Commerce degree and a Graduate Diploma in Building and Construction Law.