Why the smartest first purchase is a stepping stone, and how to tell a good compromise from a costly mistake.

Every first home buyer walks into their first inspection with a picture in their head. Usually it looks a lot like the home they grew up in, or the beautifully styled apartment they saw on Instagram last week. And that picture, more than interest rates or deposits, is often what leads them astray.

In the final instalment of the Property, Straight Up first home buyer series, there were no guests. Instead, Domain & Co. directors Mel Dennis and Warwick Brookes sat down together to bring the series home. In part one, Mel spoke with Luke Saville of Savvi Property about finding the right property and avoiding common traps. In part two, Warwick spoke with Jacquie Chia of Mortgage Zone about the finance side of the equation. This episode answers the question that sits between the two: once you know what you can borrow, what should you actually buy?

Between them, Mel and Warwick have spent close to three decades helping people buy, sell and invest across Melbourne. Their answer is simple, and it runs against what many first home buyers want to hear: stop looking for the perfect property and start looking for the right one.

The Stepping Stone Mindset

The single biggest mistake Warwick sees first home buyers make is trying to buy their forever home first. Most people, looking back on their own property journey, will tell you their first home looked nothing like the one they eventually settled in. At the start, you rarely need the space, the school zone or the backyard you will need ten years later.

Warwick frames the first purchase as a launch pad. Get it right and it will propel you into your next property. Get it wrong and it can hold you back from ever reaching the home you really want.

“If you get it right, it will be able to launch you into your next property. But if you don’t get it right, it will hold you back.”

Warwick Brookes

Mel adds a dose of honesty that many younger buyers find confronting: you are unlikely to be able to buy what your parents have right now. They have spent decades working towards their current home. Expecting your first purchase to replicate it, or to sit in the same suburb, often pushes buyers into a substandard property in an expensive area simply because it feels familiar.

A better question, Warwick suggests, is this: where can I buy a good quality property that will help me get into my next one?

There is a quieter benefit, too. Owning a home teaches you how property actually works. When you rent, the landlord pays for everything. When you own, you can make changes, add value with help from handy friends, and start to understand how equity is built. Those lessons carry straight into your second purchase.

Buy for Growth, or Rent for Lifestyle

Mel and Warwick draw a sharp line between two very different motivations: buying for lifestyle and buying for growth. For most first home buyers, Warwick believes growth should come first, not least because your home is one of the few investments you will ever make where the growth is tax free.

If your heart is set on a lifestyle location that is unlikely to grow in value, his advice is counterintuitive: rent there instead. Once you factor in council rates, body corporate fees and interest, an apartment in a slow growth location can easily cost more to own than to rent. In that scenario, renting where you want to live and investing your money elsewhere is often the smarter play.

“If you buy a property that is not going to grow in line with the market, then you’re better off renting.”

Warwick Brookes

That is not an argument against the Australian dream of home ownership. It is an argument for being clear eyed about whether a particular property will actually move you forward. The homes that do are often not the prettiest, nor in the most fashionable postcode right now, but they are the ones that put you in a stronger financial position later.

The Real Cost of Getting It Wrong

Buying for how you live today, rather than where you want to be in five or ten years, carries a hidden price tag. Stamp duty on the way in, and agent fees and marketing costs on the way out, can wipe out years of growth if you are forced to sell early.

Warwick regularly meets buyers who purchased a property they were excited about, only to realise three years later it no longer suits their needs. As Mel points out, three years is rarely long enough to build meaningful equity, so those buyers have often spent tens of thousands on transaction costs with little to show for it.

That is why, when Domain & Co. sits down with clients, a central question is: what scenario keeps me in this property for the longest? The longer you hold, the more you benefit from growth. The more often you turn properties over, the more equity leaks away.

The timing matters, too. Melbourne has been through a period of slow growth, and Warwick expects that to continue for a while yet. In that environment, a long term outlook is not optional.

Why the Best First Home Is Rarely the Prettiest

Social media has changed what first home buyers want. Many now look for an Instagrammable property that photographs beautifully. Warwick’s concern is that with those homes you are usually paying a premium for the building rather than the land, and land appreciates while buildings depreciate.

His personal preference is the opposite: buy the ugly duckling and make it beautiful. That does not mean major renovations. Paint, carpet and light fittings can transform a tired home, and seeing past those cosmetic issues can have a big impact on future value. As he puts it, he would rather buy something that needs that work than pay someone else a premium for having already done it.

“I personally want people to buy the ugly duckling that they can make look beautiful.”

Warwick Brookes

Warwick also sees the other side of the fence through Domain & Co.’s vendor advocacy work. Styling is designed to create an emotional reaction, because emotion is what drives buyers to pay the most. Buyers need to recognise that reaction and look past it.

Two traps come up again and again:

• Furniture that hides a poor floor plan. A small two seater couch and a coffee table can make a living area look generous. Warwick often walks into a styled room and immediately asks where the television would actually go. Door placement and wall space matter far more than the cushions.
• Bathrooms designed for photographs. Many look stunning but have nowhere to put anything. Everyone needs storage in a bathroom, and its absence becomes obvious the day you move in.

His simple test: imagine taking everything you own right now and moving it into this property. What would it look like then?

The Fundamentals That Actually Matter

Strip away the styling and Mel and Warwick keep returning to the same handful of fundamentals:

• Owner occupier appeal. Would a home buyer want to live here? Properties designed for investors tend to sell to investors, and with investors scarce in the current market, you want to know an owner occupier will want it when you sell.
• A good floor plan. Practical layouts age well. Awkward ones never get better.
• Natural light. It is one of the hardest things to fix and one of the first things buyers notice.
• Unglamorous, but essential.
• Room to add value. Cosmetic upside lets you build equity through your own effort rather than paying for someone else’s.

Apartments: Where First Home Buyers Get Caught

Apartments are a common entry point for first home buyers, particularly closer to the city, and they are where Warwick urges the most caution.

Newer buildings can look impressive and offer great facilities, but the body corporate minutes often tell a different story. Warwick recently helped a client who specifically wanted a two bathroom apartment in the city. They looked at around twenty buildings. Only one was free of fairly major building defects, and many had legal action under way against builders along with high body corporate fees. Newer buildings, he says, carry far more complexity and demand far more research.

Older buildings from the 1960s and 70s are generally easier to assess. You can see how the building has been maintained and how the owners corporation is run. They may not be as beautiful, but floor plans are typically larger, more land is attributed to each apartment, and they tend to sit in good locations. Mel notes that this echoes what Luke Saville told the show in part one: smaller blocks on generous parcels of land, rather than towers covering every square metre, are where he sees real value and growth.

Two less obvious risks are worth knowing about:

• Owners corporations where you least expect them. Mel recently inspected properties in Melbourne’s east that looked like ordinary five year old houses in a house and land estate. The contract revealed an owners corporation with fees to maintain the gated community. Always read the contract, and make sure you understand what you are reading.
• Multiple owners corporations in one building. Mixed use buildings with commercial premises below and residences above are increasingly common. In one recent case, the commercial body corporate was chasing $240,000 in arrears, and the residential owners had to cover the shortfall to keep insurance and other essentials paid. That is a headache no first home buyer needs.

As Mel puts it, you don’t know what you don’t know, which is exactly why surrounding yourself with good professionals matters.

Warwick’s Apartment Deal Breakers

Asked which apartments he would cross off a client’s list without a second look, Warwick did not hesitate:

• No balcony or courtyard. Don’t buy it.
• No car park. Don’t buy it.
• A car stacker. Stay away.
• Bedrooms without an exterior window. Borrowed light from inside the apartment, or a sliver of light down a narrow lightwell, is not enough. Every bedroom needs a genuine external light source.

Mel adds a few of her own. Watch the orientation, so the apartment is not purely south facing or staring at a neighbouring wall. Be wary of poor floor plans and tiny bedrooms where a queen bed and two bedside tables simply won’t fit. All of these, she notes, come back to haunt you when it is time to sell.

Then there are views. Many buyers pay a premium for a city outlook without considering the development sites around them. Once that view is built out, the premium disappears with it. Warwick has seen new buildings go up so close to existing balconies that neighbours could almost pass each other a coffee.

“Typically, you’ve bought it because of those views, and once those views are gone, you will lose money on that.”

Warwick Brookes

Thinking Beyond Today

Looking five or ten years ahead means thinking about what could be built around you, not just what is there now. Warwick points to the Victorian Government’s push for greater density, including its Activity Centres Program. More apartments per site means more residents and more cars, and with reduced car parking requirements for some new developments, tenants without spaces will spill onto surrounding streets. For certain city apartments, he believes this increased density will weigh on future values and could even push them backwards.

Life changes matter just as much. A new relationship, and especially a child, fundamentally changes what you need from a home: space, location and school zones. Buying something now and needing to sell in three years can cost you a great deal, and if you bought the wrong asset, you may not be able to sell without a loss at all.

Mel raises another shift: working from home. A home that is perfectly pleasant to live in may not be pleasant to spend all day in. With hybrid work now firmly embedded, and the debate over a legislated right to work from home in Victoria still very much alive, buyers will scrutinise their homes more closely. Warwick expects apartments with a proper study nook or work area that gets natural light to become noticeably more popular, especially as so many new apartments are built to be as compact as possible.

The Price of Waiting for the Perfect Market

Many first home buyers are holding out for the perfect market, the perfect interest rate or the perfect property. Warwick thinks that is a dangerous game, and believes right now is a great time to buy.

In his thirty years in the Melbourne market, he has seen this pattern before. Buyers wait because they expect prices to keep falling. Then the market turns, and it turns quickly. Prices start rising before most people notice, and buyers who were waiting for a bargain suddenly feel priced out and miss the cycle entirely.

“The people who make the most money out of real estate, they buy and they just hold.”

Warwick Brookes

His view is that buying the right property, meaning one that will genuinely grow or has the potential to grow, works over the long term regardless of whether you buy at the bottom or the top of a cycle.

What Buyers Regret, and What They Never Do

The most common regret Warwick sees is impulse buying, and it follows a familiar script. A buyer does their research, finds a home they love, and misses out at auction. They are upset and vulnerable. The agent mentions another property available off market. Under pressure, and desperate to buy something, they sign without thinking it through. Only after moving in do they realise the floor plan doesn’t work.

Warwick’s warning is pointed: many properties sold off market are off market precisely because the agent knows they have issues that would surface in a public campaign. The off market environment makes buyers feel they are getting a good deal when they may be getting the opposite.

And what do buyers never regret? Buying a home that goes up in value a lot. Mel sums up the ingredients: a quality location, near transport rather than on it, and buying sooner rather than procrastinating.

A Compromise or a Mistake?

With prices where they are, most first home buyers will not be able to afford exactly what they want, exactly where they want it. Warwick is not a fan of buying for lifestyle, but if your long term goal is a particular suburb, you may need to move further out now to buy a better quality property that will grow with the market. As he says, most people have to sacrifice some things to get ahead.

The key is knowing the difference between a compromise and a mistake:

• A compromise is a matter of personal preference. An older kitchen you would rather replace. A location that isn’t quite ideal but will work. You can live with it for as long as you need to.
• A mistake is buying something cheaply because it has a fundamental issue, such as a home directly opposite a train line, and expecting a different outcome when you sell.

“History typically repeats with properties. If you buy it cheap, you’re gonna have to sell it cheap.”

Warwick Brookes

Be Careful Who You Listen To

Parents, friends and social media all shape first home buyer decisions. Parents usually mean well, but Mel notes their advice comes from a different generation and a different market. What worked twenty or forty years ago may not work today, and sometimes their guidance reflects what suits them rather than their children.

Warwick considers social media the most dangerous influence. Much of the property content he sees is created by younger people who may have bought one or two properties but have never lived through a full market cycle. The videos are engaging and well made, but in a cost of living crisis, where every saved dollar is hard won, following the wrong advice can set you back years. Mel adds that everyone’s circumstances are different, so comparing your journey to an influencer’s rarely makes sense.

One specific piece of advice Warwick wants buyers to ignore is relying on suburb reports. They are too general. Every suburb has good and bad pockets, and a headline that a suburb is performing well tells you very little about the property in front of you. Instead, Domain & Co. drills into the data for the specific property type. If you are buying a three bedroom, one bathroom house, analyse three bedroom, one bathroom houses in that suburb and compare their index to the broader market. Has it consistently underperformed or outperformed? Is the line choppy? A volatile asset can leave you selling at a low point and losing money.

The One Thing Every First Home Buyer Should Understand

Asked what he would tell every first home buyer in Melbourne if he had five minutes with them before they signed, Warwick’s answer was simple: understand what a good property actually is. Know the fundamentals that will make it work for you over time, so you can capture that tax free growth and use it to step into an even better asset.

As Mel concluded, your first property doesn’t need to solve every problem or tick every box. Focus on the fundamentals, understand your long term goals, and treat your first purchase as the beginning of your property journey rather than the end.

Key Takeaways for First Home Buyers

• Treat your first home as a stepping stone, not a forever home. Ask which property will best launch you into the next one.
• Prioritise growth over lifestyle. If a lifestyle location won’t grow, consider renting there and investing elsewhere.
• Plan to hold for the long term. Stamp duty and selling costs punish short ownership periods, and three years is rarely enough.
• Look past the styling. Check the floor plan, natural light, storage and where your own furniture would go.
• Favour properties with cosmetic upside. Paint, carpet and light fittings can add real value.
• Don’t wait for the perfect market. Buy the right property and hold it.
• Never buy on the rebound. Be especially wary of off market offers after missing out at auction.

Key Takeaways for Apartment Buyers and Families Helping Them

• Read several years of owners corporation minutes and the full contract before committing, particularly in newer buildings and mixed use developments.
• Consider well maintained older blocks with larger floor plans and more land attributed to each apartment.
• Rule out apartments with no balcony or courtyard, no car park, a car stacker, or bedrooms without an exterior window.
• Don’t pay a premium for a view that a neighbouring development site could block.
• Factor in density changes, life changes and working from home when thinking five to ten years ahead.
• Parents: recognise that today’s market differs from the one you bought in, and steer towards fundamentals rather than familiarity.
• Ignore broad suburb reports. Look at how the specific property type has performed against the wider market.

This article is based on the Property, Straight Up episode “Your First Home Isn’t Your Forever Home: Buying the Right Property, Not the Perfect One”, part three of the first home buyer series, featuring Mel Dennis and Warwick Brookes of Domain & Co.

Listen to the full series on *Property, Straight Up*, available wherever you get your podcasts.