First homebuyers boosting sale prices above expectations

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The fierce competition from first homebuyers, abetted by the interest rate drops and government incentives, has pushed property prices sometimes well above expectations lately.

While the federal boost to first homeowners can range from $7,000 to $14,000, many properties are selling for double that amount above the list price.

"(First homebuyers) are trying to take advantage of this extra money," said Nathaniel Geisler, a residential sales agent with Knox Family Real Estate. "But I don't think they realize they're spending more money then they are getting."

Geisler said a two bedroom in Lindfield recently sold $13,000 over the asking price. Another sold for more than $40,000 above expectations.

"The only thing that can really justify that is the first homeowner grant," Geisler said.

Pino Tedesco, director of Metropole Property Investment Strategists in Sydney, said the first homebuyer activity has been unprecedented, making it unattractive for investors to compete.

"I've never seen anything like it, it's just really, really competitive," he said. "Under $500,000, that's just a market I don't think you should be buying in. I'd rather wait until the competition subsides."

The opposite could be said for high end properties, out of the range of first homeowners and with little competition from other buyers.

Tedesco cited an example where he negotiated on a waterfront property in Abbotsford, listed for $1.59m, down to 1.25m -- a 21% drop.

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