Will it be harder for First Home Buyers?
So with all of this prosperity, this economic prosperity that Australia is enjoying; there is one group of people who are looking in at the property market thinking, “Can we play the game too?”. And of course, I am talking about the first home buyer. They’re finding it increasingly difficult to get their foot on the ladder. Because let’s think about what’s going on. In the early part of their career, they’re building up their income, and they’re frantically trying to save for a deposit. But let’s be honest, that’s a very slow process. To get enough money to get onto the property ladder, it can take years actually to do.
The first challenge they face is getting that initial deposit in place. But the second part of that, and it’s an extension of saving for a deposit is, property prices are growing at such an incredible rate, particularly in some of the bigger cities. They’re being discouraged by the fact that the property prices are growing at a very much faster pace than they can actually put the money away. So on the one hand, they have to save for a deposit, but on the other hand, they are facing with increasing property prices. And then the third challenge for the first home owner is they’re probably the most neglected sector of the market because existing owner occupier who is upgrading or an investor, probably have some money set aside to get a buyer’s agent to help them. But the poor old first home buyer doesn’t have that luxury because every cent matters to them. And if they’re trying to put every cent towards their deposit, there’s nothing left over, so they’re often on their own.
What I’d suggest to the first home owners is they need to think a little bit outside of the square.
Because the first thing is, they may not actually be able to live in the first property they buy. They may have to go and buy a one-bedroom flat in South Yarra, or in Bulimba, or in South Perth, or wherever they live. Just buy a smaller property that’s potentially not their dream home so that they can get on the ladder, put a tenant in and they’re effectively rentvestors. They’re not actually living in it themselves. But at least they’re on the ladder and they can enjoy the benefit of that growth.
The other thing they could think about is if they have a great relationship with their family, their parents, their cousin, their sister, their aunty, they could go and approach them and say, “Can I use some of your equity as leverage for me to use as a deposit, so that I could get onto the property ladder sooner?” That’s essentially guarantor loan and that could mean I could buy it today rather than waiting 6 or 7 years down the track. So that’s a very, very good way to do it.
The other thing to think about is if you want to get some like-minded people together, pull your resources, pull your savings, and pull your income to buy a property together. That could mean you could get on sooner as well. But of course you got to balance that with some of the very best friendships have been undone by creating a business relationship. You have to go into that with a very open mind, and of course, there are lots of first home owners grants available from state governments to encourage you to buy your first home. Particularly if it is a brand new. There are a few things out there so it’s not all doom and gloom for first home buyers.
But what I would say in term of the property market at large for the first home owners, is circumstances have changed. As I said at the top, 25 years of economic prosperity. I grew up in the 70s. It was just assumed that the Great Australian Dream would be for everyone and that you could buy your own home. But going forward in the new millennium, it may just be the case, there is a generation of people who don’t own real estate, and they may be long term tenants. And so my suggestion to the first home owner is to embrace that. Because it has some wonderful lifestyle bonuses that could come with the flexibility of not being tied down to a mortgage in a particular location. But for those of you who are booming to get onto the property ladder as a first home buyer I suggest you explore some of those opportunities that I had talked about before. And for those of you who don’t have that burn to get onto the ladder, it’s about being peaceful and just coming to terms with the fact, you may be one of those people that are just a long term tenant.