If you’re a follower of statistics you won’t be enjoying the unhappy reading that comes out of Canberra on a regular basis about the prospects of home ownership in Australia.
According to the Australian Health and Welfare Report for 2015, Australia currently ranks as the third worst performer amongst housing affordability within OECD countries based on the ratio of income to housing prices – just behind New Zealand and Canada. Staying a tenant isn’t all good news either. Between 2008 and 2012 our ratio of rental stress, deemed as people paying more than one third of their income towards accommodation, increased from 35% to 41%.
The news on buying a house is particularly depressing for those in the 25 to 34 age group, the bracket normally associated with first home buyers. The cost of a home is now 8.9 times their annual income compared to 7.8% in 2001.There is an ever increasing number of young people who see a future tied to paying rent, or worse, having to live at home with their parents.
Despite the overall numbers, however, there are still pockets of optimism to be had for young people. For every sad story there is also a story of success. A quick Google search will uncover stories of young people who are bucking the trend and buying themselves homes, or even investment properties, without the help of wealthy parents or special circumstances.
So what’s the trick? How do these young people know how to buy a house when clearly hundreds of other Australians are struggling just to pay the rent?
It’s not easy – but with effort and discipline it’s possible to make your start on the housing market despite the ever increasing rise of housing prices. Here are our key tips on how to save up to buy a house in the current property market.
- Get good advice. You don’t need to have all the answers yourself. Building a team of competent advisors including your lawyer, accountant, financial advisor or mortgage broker is a critical step to getting you started. Not only will they have the advice on how to buy your house and finance it, but they will keep you on track if things become tough.
- Be creative. There is always more than one way to ‘skin a cat’. Using your parent’s equity can be a great way to raise your deposit without contributing cash yourself or having them reach into their own pocket. There are dozens of other creative options that can help you through the process of buying a house.
- Look further afield. As much as we love to live in the most desirable areas this will come with a cost. Moving further out to suburbs that are a long commute can come with a better price tag. The good news is many of these suburbs can be up and coming and the potential for growth is always on the cards.
- Cut costs. Every dollar you don’t spend is an extra dollar on the mortgage deposit. Sitting down and reviewing your living costs is the prefect starting point towards your first home. It can be easier to eliminate expensive unnecessary bills than you think.
- First home owners grant. Believe it or not the government wants to see you get your first home. They know that owning a house is still the ‘Great Australian Dream’ and one of their tickets to getting re-elected so they have a vested interest in providing financial incentives, or at the very least not ending them. Tick the right boxes and some added support could be coming your way.
- Don’t get emotional when buying. It’s important you see that first house for what it is – a foot on the ladder. It might not provide you with everything you desire in a house but buy wisely and it can lead you where you want to go sooner than you think.
- Reduce personal debt. Hand in hand with reducing expenses is reducing your debt. If you live on your credit card then every expense you run up reduces your ability to borrow and affects your rating with your lender. Reduced debt increases your ability to commit to your mortgage.
Each of these seven steps will help set you on the path to your first home. Take the first step today by taking action on step one and talking to the people who can help make your dream come true. We can connect you to the best advisors here.
The information provided is intended as a guide only and does not take into consideration your personal situation, needs and objectives and should not be considered as advice of any nature.