Think you’ll never own property? Think again
Between investor competition and skyrocketing property prices, first-time home buyers have been having a hard time getting into the property market. But for some, a new approach might be all it takes to make the great Australian dream a reality.
Challenges facing first-home buyers
First home buyers are facing some real challenges in the Australian property market. Negative gearing, capital gains tax concessions and low interest rates are keeping investor demand high. This increases competition for properties and can push up housing prices.
Housing affordability is another issue, particularly in the Sydney and Melbourne markets, where property prices are continuing to exhibit solid growth. Meanwhile, saving for the required deposit isn't easy, as wages aren’t growing at the same rate as house prices.
Achieving your savings goal
When you're finding it difficult to save the deposit, it might be time to try a different approach.
For instance, if your social life eats into your savings, consider investing some of your money in a term deposit. This way your money is locked away, safe from temptation, for a period of time – from 30 days to five years – accruing interest at a set rate. This guaranteed return makes term deposits a safe and reliable way to grow your wealth.
You won’t be able to access your money without penalty while it’s in a term deposit. This option is best suited to people who won't need to access the money before the end of the specified term. You can use this time to keep growing your savings outside of the term deposit.
Alternatively, you might prefer to invest in shares. Like property, shares are usually a long-term wealth-building strategy. They can be risky, especially if you're trying to turn a quick profit. Investing requires a lot of time, research and analysis. To make sure this option is suitable for you, it’s important to seek financial advice before entering the share market.
Other routes to property ownership
If saving isn’t the issue, but property prices in your desired location are beyond your means, consider temporarily changing your goals.
For example, you could use the money you've saved to put down a deposit on an investment property in a cheaper area. That way, you’ll get a toehold in the market and can continue to rent and live in your preferred neighbourhood.
Bear in mind, however, that you'll need to be able to afford the costs associated with owning an investment property, such as advertising and property management fees, as well general upkeep. You may also need to cover unexpected expenses, like emergency repairs or the mortgage during periods where the property is vacant.
You could purchase an old or rundown property at a cheaper price and renovate it, but there can be significant costs involved in buying and selling properties which may eat into your profits. If you haven’t done your research or you’re not prepared for renovating, there’s a chance you’ll spend more on improvements than you might make back.
Buying your first home can be a daunting prospect. A flexible approach and the ability to think outside the box could make all the difference.