Nicky Trup and John Stapleton, Additional reporting: Linda Daniele, Anthony Klan
From: The Australian
October 30, 2008 12:00AM
JAYLENE and Phillip McSherry lived in rented accommodation for almost seven years, but when the first-home buyers grant doubled to $14,000 earlier this month they decided now was the time to buy.
The couple and their two children, Xander, 4, and Scarlett, 15 months, have looked at 15 properties in the past few weeks and are keen to make an offer.
One of their favourite areas is Leumeah, in Sydney’s southwestern suburbs, where they hope to use their grant towards a deposit on a four-bedroom house. “It really encouraged us to get a move on because it only lasts until June,” Ms McSherry said.
Although the Government’s increased grant will entice thousands of first-home buyers into the market, borrowing hundreds of thousands of dollars and buying in a time of falling prices is not without risk. Leumeah, 40km from the Sydney CBD, has been identified by The Australian as an affordable suburb for first home owners and one of 80 in Sydney where house prices are in decline.
Over the past five years, house prices have dropped 1.8 per cent and the median price has fallen to $270,000. In the Campbelltown local area, which includes Leumeah, prices have dropped in each of the past four years, including a 2.4 per cent fall this year.
There is a risk that if prices continue to fall, buyers could end up with negative equity – where their mortgage is larger than the value of their home.
The McSherrys, who have a combined income of about $120,000, have borrowed $350,000 to buy a house for themselves and their children. The couple, who see themselves as “smart with money”, are not worried about their property losing value in the short term.
“I would probably worry if we were only going to be there for a couple of years but I think we’ll be here for at least 10 years,” Ms McSherry said.
However, in the street they are looking at, Normandy Terrace, Leumeah, a house that was bought for $230,000 in February 2003 was sold for $140,000 in September that same year.
Like the McSherrys, Shankar Tirupurrajagopal, 29, and his wife Sangeetha Manoharan, 22, hoped to take advantage of the $21,000 given out for new homes and visited the Clarendon offices at Sydney’s Minto One housing estate. As a marketing ploy, Clarendon has added an extra $7000 to that offer, bringing it to $28,000.
Mr Tirupurrajagopal, who works as a technician in a factory at nearby Ingleburn, was one of those attracted by the offer. “We were just looking, thinking of getting a home, and then the Government announced the $21,000 grant,” Mr Tirupurrajagopal said.
“We were surprised. It is a generous amount of money.
“The grant has made us more interested and we have now decided to make the move.”
They are looking at a home and land package for about $340,000, with Minto being one of the few places in Sydney with such cheap housing.
In Camden yesterday, another suburb where prices have fallen over the past five years, Jamie Mitchell was on his way to pick up the keys for his first home, a three-bedroom timber-clad house.
The self-employed carpenter, 33, received the $7000 first-home owner’s grant but just missed out on the doubling to $14,000. He said he was still pleased because he was sure he had snagged a bargain at $255,000.
“There are a lot of more expensive houses around but Camden’s still affordable,” Mr Mitchell said.
“The house I’ve bought needs a lot of work because it was built in the 1930s.”
Mr Mitchell is aware that Camden comes in as one of the more affordable areas, but is confident prices have bottomed out.
“Before it was exaggerated and I think property prices are close to where they really should be now,” he said. “For the price I got my house for, I just don’t think it can go down.”
Mr Mitchell said he was preparing for tougher times ahead, with possible cutbacks in customers’ expenditure on things such as pergolas, decking and verandahs.
But the history isn’t great for his street. During the last property slump, the owners of 72 Macarthur Road, Elderslie, took a hit of $8750 – or 5.5 per cent – on the value of the house.
The property was bought for $153,750 in 1989 but sold for just $145,000 five years later in November 1994. There have been 102 on-sales in Macarthur Road since the late 1970s.