61% of homebuyers failed this basic test

Given that every other Australian owns property, it can be hard for investors to understand why some people don’t.

By Jade Tweedie

06-03-2019 |
Given that every other Australian owns property, it can be hard for investors to understand why some people don’t.

There is a certain amount of mental tenacity required to ‘decide’ to become a property investor and for some, their naivety about the industry is enough to dissuade them from getting into the property market. Interestingly though, research has shown that many of those who do decide to buy, know much less about the process than you might expect. A property literacy survey conducted earlier this year by Home lender ME revealed a number of surprising realities about Australia’s first home buyers and more experienced buyers that could be inspiring, but are mostly concerning – bungee jumping anyone?

Of the 1,000 Australians surveyed in total, almost 70% of respondents expressed confidence in their financial decision-making capabilities and 50% agreed they understood the processes and costs involved in buying a property. This was not necessarily reflected in their answers however. Both first homebuyers and existing owner-occupiers took part in the survey, but ignorance over certain points or issues did not lie more with one group than the other.

The greatest revelation was that 61% of those home buyers who completed the survey failed the test – with a fail meaning that less than 50% of the questions were answered correctly.

General tasks like conveyancing, building or pest inspections and cooling off periods, can be terminologies first home buyers are unfamiliar with; while finding the right players – agents, buyers’ agents, conveyancers, strata agents, solicitors and so on, when you don’t really know how to play the buying game, can be daunting to say the least.

Lack of knowledge in these areas was evident in the survey results, with 88% of first homebuyers not understanding for example that lenders are protected by lender’s mortgage insurance, not borrowers. Or that when you buy at auction, there is no cooling off period (85% thought there was); or that you must pay the deposit on the spot when yours is the accepted bid on auction day (78%). Two thirds of homebuyers surveyed could not correctly state what the term conveyancing meant and 63% may have heard of an offset account, but did not know what it was.

It’s not all gloom and dimness however. Of all those surveyed, 90% provided correct answers about stamp duty and who pays it, while 71% understood what having equity in their home means, in practical terms. More than two thirds of people knew how the application of interest worked, over the term of a shorter loan rather than a longer one and the same amount know that banks consider more than just your income when deciding whether to approve your loan or not.

Visit www.firstnational.com.au and download a FREE homebuyers guide today. It will tell you everything you need to know about how to buy your first home.