- Majority of Australians say younger buyers need to rely on parental financial assistance to purchase a home
- High property prices and low wage growth has contributed to this
- Rentvesting is one alternative way to get on the property ladder
Is the dream of homeownership for younger Australians over?
Skyrocketing house prices throughout the pandemic and sluggish wage growth have all contributed to this, with many Australians, especially in the two largest cities, struggling to huddle together a 20% deposit.
69% of Australians think the dream is over, if it wasn’t for one major factor – parental financial assistance – according to a survey by Aus Property Professionals.
Of this group, 31% say that rising said that rising rates and the higher cost of living are exacerbating the situation. 13% claim that Gen Z’s and Millennials want to live a luxury lifestyle and are not willing to sacrifice in order to save a deposit.
To help tackle the deposit hurdle, the federal government has their Help to Buy scheme along with shared equity schemes across the states.
While a few thousand people are benefitting from these programs each year, it fails to address the wider issue of housing affordability.
“It depends if you are purchasing the house by yourself or with a friend or partner. It is VERY difficult for single people to buy their own home unless you’re on a massive wage. Purchasing with a partner or friend is still expensive but more achievable,” said one respondent to the survey.
Another added, “anyone now starting work on the basic wage has no hope of home ownership unless they progress quickly to a far higher paid position. Most will find it difficult to pay rent, car payments/public transport, rising food costs to ever be able to save for a deposit let alone pay of a loan, particularly if interest rates return to the 4%-6% as was the norm for decades.”
Aus Property Professionals Founder and Managing Director Lloyd Edge said the findings were “a shame” but not surprising given the current circumstances.
“It’s even more challenging in the 2020s to save that first deposit, however, with the right strategy in place the ‘Great Australian Dream’ of home ownership is still possible, even if you need to start outside of the capital cities or ‘rentvest’ for awhile until you can buy your dream home.”
Lloyd Edge, Aus Property Professionals
A positive note from the survey finds was that 31% of respondents believed that owning your own home is achievable for the average young adult. 19% said there is plenty of affordable housing in regional and rural areas.
Alternative strategies
In light of this, Mr Edge has provided several alternative strategies that can be used to get onto the property ladder sooner.
Rentvesting
Rentvesting is the act of renting in an area you’d like to live in, while investing in an area where you can afford to buy, such as an outer city or regional area. You can then use equity from the investment property to work you way up to buying your dream home.
Buying with family and friends
Another strategy is to buy with family and friends, as opposed to just yourself or a significant other. This process makes it much easier to save for a deposit.
However, you must seek legal advice and make sure everyone is fully on board and have an exit plan in place. This Is so conflicts and relationship breakdowns don’t occur down the track.
Living frugally
Unless you are on a very high-income, you would need to cut back on luxuries to save a decent-sized deposit.
Lenders would look at you more favourably if you can demonstrate that you are finically responsible. It will also set you up in good stead as you have built effective lifelong financial habits.
Do you research
It is essential to research across the property markets to get an accurate understanding of the market value of the type of property you wish to purchase.
You should look for similar properties in the same areas, including the average days on the market. Also, you should never purchase a property without due dillgence and ordering a pest and building inspection. For stratas, you should review minutes of meetings too.
“Even though getting into the property market is tougher than ever, young adults shouldn’t despair as there is still a lot of good opportunities out there if you’re financially savvy and implement the right strategy for your circumstances,” concluded Mr Edge.
