Over the past month, I have been looking at two apartments located in quiet streets within my suburbs of interest. One of them is a ground-floor apartment in Ormond, located south of Carnegie in Melbourne’s inner south-east. The other one is a first-floor apartment in Hawthorn East, between Hawthorn and Camberwell in inner east Melbourne. I have inspected both properties twice, checking the condition of each property, locating the plugs and NBN ports to put my appliances in and seeing how I could arrange my furniture. I also did some due diligence on both properties. I did some research online to see which planning zone the properties are in and whether there are any problems with the property such as being located in a flood zone. I have also read the contract and vendor statement for each property myself and got them reviewed by the conveyancers to see if they need to be revised. Lastly, I have ordered building and pest inspections to see whether there are any oustanding problems that need to be rectified.

Looking at both properties closely, I can see both the positives and negatives of each one. The Ormond property is only a 10 minute walk to the nearest train station in the Frankston line. That makes it easy for me to catch the train. Moreover, when the Metro tunnel opens next year, I can change to an express train in Caulfield station to go straight to the city. I also really liked the big outdoor space of the apartment. In fact, there is enough space to build an outdoor deck and set up some small garden beds to grow some plants and vegetables.

However, I have spotted a few negatives with the Ormond property. The aforementioned outdoor room has the fences in the wrong places, meaning the window of one of the bedrooms is overlooking a neighbouring backyard, presenting an invasion of privacy. I have alerted the agent of the issue who relayed it to the vendor. The fence problem is nearly being fixed with a quote being organised to move the fence. What cannot be fixed; though, are the rooms in the apartment being small. This not only means I cannot fit everything that I have in the apartment, but I would outgrow it quickly, forcing me to sell in the short-term. That is what is stopping me from buying the property.

In contrast, I prefer the Hawthorn East apartment more. That apartment is located within a quiet street in Hawthorn East. It is near a train station, meaning I can easily catch the train to the city; Camberwell, where there are plenty of shops, markets and amenities; and a park, where I can do some running. The rooms are also big, meaning I can fit everything that I have while still having enough room to buy more things. That makes it less likely that I will outgrow the apartment and being forced to sell the apartment too soon. Lastly, the kitchen and bathroom are renovated, meaning there are only a few things that I need to do (mainly replace the carpet with the floorboards and the heater with a split system) before moving in. Despite a higher price tag and higher strata fees, it is a really nice apartment that I can see myself living for years to come.

The auction for the Hawthorn East apartment is happening tomorrow. Having done a lot of research on the apartment, I will be coming to this Saturday’s auction and bidding with the intent of buying the property. I feel I have a good shot of winning the auction. Not only have I done a lot of research on that property, but I have decided on the prices that I think will get me the property without paying too much. If I fail to get the property; though, there are still plenty of properties that I can buy that would suit me. It has only been over a month since getting my pre-approval, but I am already getting stuck into the property search and seeing what it is like to be looking for the property that would be right for me. I can use the upcoming Christmas/New Year break to recharge and reflect on what I have learnt so far. Hopefully when I get back into the property hunt in the new year, I will be renewed and ready to find the property that is right for me.

I think I may have made a mistake in applying for my home loan too soon. Late last month, I submitted my credit and Victorian Homebuyer Fund applications to the bank with the required documents. I was motivated to submit these applications before the RBA announced that it would not be changing interest rates as I did not want to miss out on getting a place in the Victorian Homebuyer Fund. Also, given that it takes around 6 weeks to get a spot, I wanted to submit these applications soon to get the process started. This motivation was further fuelled by the fact that I would not be eligible for the Commonwealth Government’s “Help to Buy” scheme as I exceed the $90,000 per year income threshold as a single person. Hence, if I failed to get in the Victorian Homebuyer Fund, there would be no other shared equity schemes I would be eligible for. This would restrict my budget on buying my first home.

Since submitting my applications last month, the bank has sent numerous enquiries and requests for more documents to provide evidence behind my income and employment history. Having previously provided the minimum number of documents I needed to submit my applications, for the bank to come back to me asking for more documents was a bit dispiriting. In particular, the bank wanted a letter from my employer to show that I am now working full-time in the university. Because I have been moving around jobs over the past few months, they wanted that document to show that I am now earning a full-time income from the university.

Even though I have the letter to submit to the bank, I am hesitant to do so because one of my roles is contracted to end soon. My work in the university is split across two fixed-term roles. While one role will last until mid-2027, the other role is contracted to conclude by the end of the year. I did not disclose that detail in my credit application as I am in the process of getting that role converted into a continuing role and assumed that I would be working full-time in the university next year. The fact that the bank wants an employer letter from me saying that one of my fixed-term roles will end soon will lay bare the fact that I did not fully disclose my current employment situation in my credit application.

I have emailed the bank to see what they will do with my credit application. Best case scenario, they put my credit application on hold while I negotiate to secure a continuing role in the university, meaning I can work full-time in the university until at least mid-2027. Worst case scenario, I need to submit the required documents now with the current situation that one of my roles would be ending soon. This would either decrease my borrowing capacity massively, limiting the properties I can buy, or they reject my credit application outright. If that happens, that would put a black mark on my credit history which would make it harder for me to get a home loan. I am hoping that I can delay my credit application without the bank rejecting my application outright so that I have time to negotiate for a continuing role with the university.

Upon reflection, I was driven by FOMO in trying to get a place in the Victorian Homebuyer Fund before those places run out. The presence of the government getting an equity on my first home would allow me to buy a more expensive property with the money I have, increasing the chances that I would stay in it for a longer period of time. I overlooked the fact that full-time employment in the university was not guaranteed from the end of this year. If I had waited until I secured full-time work beyond 2024, I would have the evidence I need to show the bank that I have the income to keep up with my minimum repayments for my home loan. Here’s hoping that this is not a fatal mistake in my home buying process and that the bank would be kind enough for me to ameliorate this mistake.

I was listening to a podcast the other day where they compared the property markets in Melbourne, Sydney and Brisbane. They noted that compared to Sydney and Brisbane, Melbourne’s house prices have remained stagnant over the past few years. This was due to a range of factors such as the 2020-21 COVID-19 lockdowns in Melbourne, the apartment oversupply across the city and high land taxes for investors. The stagnant house prices have made the Melbourne property market conducive to first home buyers and investors looking to buy their first home or enter the property market.

I have been tracking the outcomes of auctions in the suburbs of interest over the past few weeks. And just yesterday, I was looking over properties in the suburbs of interest that have been sold over the past month. Although I can see bargains in some properties that are within my borrowing capacity, I will be going into a property market that may be increasingly difficult to get into, for two reasons.

First, I am looking for a property that I can live in for a long time and that will be in high demand in the future when I lease or sell it. That means the property has to be rare in the market, yet valuable to the future renter or home buyer. Apartments in high-rise apartments are not rare and are clearly targeted to investors looking to rent them out, so I am ruling them out. I am also avoiding apartments on or near main roads or train lines as they would make too much noise and are overpriced for their location. I am anticipating that these apartments would be hard to lease or sell to other people in the future, making them bad property investments.

Instead, I am looking for apartments in a quiet street that I can stay in for many years and that would be valuable to a future buyer. The apartment would have enough indoor space for me to live by myself and work from home. Additionally, there is a private balcony or backyard for me to get some fresh air or to have a barbecue. Ideally, the rooms would be nicely laid out, with the living rooms separate from the bathroom and bedrooms, so that I can separate areas to relax from areas to work and to sleep. These requirements eliminate a lot of apartments for me, leaving me with few options to choose from. Additionally, there is a lot of demand for these apartments with some of them going for auction. These will be competitive to buy, particularly as more people enter the property market to buy their first home or to invest. This will be a main challenge in buying my first home.

Second, having kept track of auction outcomes in the suburbs of interest, the property market is increasingly heating up. I am seeing that most properties were sold either before or on auction day. Where the sold prices have been made publicly available, most properties were sold above the upper limit of the price guide. That has made me feel a bit apprehensive on how competitive the auctions will be, particularly if it is the property I really want to live in.

Still, I have a few weeks before I get my pre-approval to buy my first home. And there are more properties that will go on the market over the next few weeks, particularly as spring progresses. That gives me some leeway to do some desk research, go to some property inspections and watch some auctions to get acquainted with the property market. Hopefully by the time I receive my pre-approval from the bank, I will be ready to enter the property market and buy my first home as soon as possible.

What happened since the last blog post?

When I last wrote “My First Home Buyer Journey” in early February 2024, I had to put the series on hold as my borrowing capacity was not large enough to buy the ideal property and suburb for my needs. Even though I was still saving money for my home deposit, I was looking to work more days. This would boost my income which would increase my borrowing capacity, allowing me to buy a better property in the suburb I want to live in.

Since that last blog post, a lot of things happened in my life. Primarily, I had to leave one of my roles at the end of April 2024. Even though I spent a few more months to finish off my work, this put a massive damper on my pursuit to buy my first home. Not only was my income irregular and inconsistent which would have made it difficult for me to get a home loan, but I also had to focus on finding more work.

It took me four months of searching and applying for jobs before I managed to land another role. That role was in the same university as my other role, allowing me to work full-time in one workplace. This means I would receive my pay under one payroll, making it easier to show evidence of my income. Not only that, but I was also earning more money now than I would have had I stayed in my old role. Combined, these have increased my borrowing capacity which have motivated me to start searching for my first home again.

Because of this, I will be reopening the “My First Home Buyer Journey” series. As I start ramping up my first home search again, I would like to record my journey of finding and buying my first home. The updates might not be weekly as my home search activity may vary throughout this journey, but I will attempt to write regularly where I can. Additionally, I may also write on some recent issues in Australia’s property market from my perspective. I have in mind a recent topic issue in Australia that I would like to write about. It will be in an innovative format that would shed light on the different perspectives behind that particular issue.

For now, I would like to record what I have been doing in my home property search over the past 7 months. Even though I have not started property hunting in earnest, I have taken some steps to research the suburbs I would like to live in and get myself prepared for the property hunt.

What I have been doing in the property hunt?

Over the past several months, I have been thinking about the suburbs that I would like to live in. I have been exploring a few suburbs before and after I decided to put the “My First Home Buyer Journey” blog series on ice. As I came to start in my new role, I have narrowed my focus to two groups of neighbouring suburbs: one in inner east Melbourne and the other in inner south east Melbourne. Both groups are not only near train stations, but they are also close to amenities which would support my independent living. Narrowing my focus on these two groups of neighbouring suburbs would allow me to focus my property research in these areas.

Over the suburbs I have chosen, I have continued to look at all properties that have been sold in the past few months to narrow down the properties and the areas that I would like to buy. I have also been keeping track of the auction results in these suburbs to get a feel of what the property markets are like in these areas. The research work I have been putting in has been massively helpful in understanding how hot the property market is in each suburb. This will allow me to plan how I should approach each property market and how I will set the right price for the property I would like to buy.

Supplementing my desktop property research has been my in-person attendance to a few inspections and auctions. In terms of inspections, I have been looking at what properties in the suburbs are like and how easy it would be for me to walk to the train station and nearby amenities. I have also been observing a few auctions to see how they operate and how people put bids. This will be helpful in planning my approach to auctions and how I should price properties before an auction.

Lastly, having earned a regular income from both jobs, I have submitted my pre-approval application with a bank. I noted earlier that with my full-time job, my borrowing capacity has increased, and I also have a large deposit. However, my maximum borrowing capacity is still not enough for me to buy a property that I can live for a long time, in the suburb that I want to live in.

Hence, I am applying for the Victorian Homebuyer Fund with the bank. It is basically a shared equity scheme where the Victorian government owns part of the property I purchase. Getting in the fund would allow me to buy a better property for myself that I can live in for a longer period of time. The drawback of trying to get into the fund is that it takes six weeks to get pre-approval. That is because I need to get approval from both the bank and the Victorian Government to apply for the scheme. Even though the approval process from the bank does not take too long, there is a long queue to get approval from the Victorian Government to get in the scheme. It is such a long wait to get pre-approval, particularly when the property market is opening up for spring. There’s also the possibility that I might miss out on getting in the scheme as there is only a limited number of spots.

Nevertheless, getting into the Fund is a better option for me to buy and live in a property for a longer period of time. Additionally, I have some time to keep doing my desktop research and attending inspections and auctions to be well-informed of what the market is like in the suburbs I want to live in. By the time I get pre-approval from the bank, I will have been ready to dive into the property market, and make a serious effort to buy the property that I want, whether by private sale or by auction.

What I have been doing

Since my last update post, I have selected the mortgage broker and conveyancer who will support me on my home buying journey. I have also been researching a few more suburbs in north-east and south-east Melbourne and done a few more suburb tours, particularly inner north-east Melbourne which is potentially a nice area to live in.

Over the past few weeks, I have been looking at my borrowing capacity, or how much I can afford to borrow from a bank to buy my first home. I am doing that right now so that I can start researching the property market by looking at past sales over different suburbs. To determine my borrowing capacity, I have been seeing a few different mortgage brokers and ran a few calculations on the mortgage calculator at moneysmart.gov.au.

I had enough money saved to cover a 20% deposit of the median price of 2-bedroom units in different suburbs. I have also made a concerted effort to minimise my expenses by adopting the Fast and Slow System and diverting much of my excess savings towards my first home. Furthermore, even though I am currently working four days a week, I am looking to extend my working week to five days a week so that I can earn more money to save towards my first home. 

A big hit on borrowing capacity

Unfortunately, from both a mortgage broker’s and mortgage calculator’s perspective, the increase in interest rates over the past few years have eroded my borrowing capacity, to the point where I cannot borrow enough money to buy a 2-bedroom unit in the suburb I want to live in. Assuming a 6.5% interest rate on the home loan, making fortnightly repayments over 30 years with no bank fees, my borrowing capacity according to the mortgage calculator ranges from $222,576 to $435,549. This is a reduction from $247,776 to $484,863 for a 5.5% interest rate. Assuming a $130,000 deposit, this means I would only be able to afford a $560,000 home at most which is below the median price for 2-bedroom units in suburbs I want to live in.

Work days per week	% net income on repayments	Repayments per fortnight	Borrowing capacity at 6.5% interest	Borrowing capacity at 5.5% interest
4	30	$649	$222,576	$247,776
5	30	$762	$261,329	$290,918
4	50	$1,082	$371,074	$413,088
5	50	$1,270	$435,549	$484,863

What’s worse is that assuming I earn $2,540 per fortnight by working five days a week, half of my weekly income would only cover the minimum repayments on my home loan. This does not give me any room to get ahead of my home loan or to build a buffer on my savings that I can rely on should I suddenly stop earning due to injury or unemployment. 

The non-existent margin of error in my home loan repayments is what is putting me off from buying my first home more than not accumulating a large enough deposit. I can see why people are in despair of buying their first home, whether it is not having enough money to cover a 20% deposit or to keep up with the minimum repayments of their home loan.

My next steps

Despite this, I will keep saving more money in an effort to accumulate a bigger deposit so that I can reduce my home loan, allowing me to buy a better property that I can live in for a long time. I am also thinking about whether to go for one of the government initiatives to buy my first home sooner, versus the potential bigger repayments that I may need to make now and in the future.

I am also thinking about whether my first home is something that I would live in forever, or is a stepping stone to a better property in the future. That is something that I will consider as I start to do my research on the property market over different suburbs of Melbourne.

Given the above considerations, combined with other series that I am writing, I am putting regular updates on my First Home Buyer Journey on hold for now. However, I may continue to publish information and update posts on my First Home Buyer Journey if and when they arise.