With the Reserve Bank of Australia hiking up interest rates for five straight months this year, it is becoming increasingly difficult for first home buyers to jump onto the property ladder.
New research commissioned by buyer’s agent and property investment strategists Aus Property Professionals has revealed a staggering seven out of 10 Australians (69 per cent) believe home ownership is out of reach for young adults without help from their parents to come up with a deposit.
Lloyd Edge, Founder and Managing Director of Aus Property Professionals, said: ‘It’s a shame, but not surprising given the current circumstances, that many young adults feel this way about home ownership.’
The 47-year-old property expert purchased his first one-bedroom unit when he was 28 on a teacher’s annual salary of $70,000 and today owns 18 properties worth an estimated $15million.
With the right strategy in place, Mr Edge believes the ‘Great Australian Dream’ of home ownership is still possible and recommends implementing at least one of these four strategies – rentvesting, buying with family, living frugally or doing your own thorough research.
Research reveals seven out of 10 Australians (69 per cent) believe home ownership is out of reach for young adults without help from their parents to come up with a deposit. Property expert Lloyd Edge (pictured) said: ‘It’s a shame, but not surprising given the current circumstances, that many young adults feel this way about home ownership.’
With the right strategy in place, Mr Edge believes the ‘Great Australian Dream’ of home ownership is still possible and recommends implementing at least one of these four strategies (stock image)
‘Rentvesting’ has increased in popularity in the last few years, which sees buyers renting where they like to live and buying an investment property in a suburb they can afford.
Mr Edge said this is a great way for millennials to get ahead financially and build wealth over time while living in their ideal location.
‘By renting where you’d like to live and buying an investment property where you can afford to buy, for example in a regional area, you can get your foot on the first rung of the property ladder,’ he said.
‘By using equity from the investment property you can keep growing your portfolio and work your way up to buying your dream home.’
But one potential downside is having to pay rent and home ownership costs, such as council rates and home insurance, at the same time.
WHAT IS ‘RENTVESTING’?
‘Rentvesting’ is a tactic that sees buyers rent a property where they want to live and buy an investment property in a suburb they can afford
The trend is currently increasing in Australia
Rentvesting is a way forward for people who want to break into the property market, without sacrificing their lifestyle
With rentvesting, investors can get the best of both worlds because they can afford to rent where they want to live and put their ‘spare’ funds to work by buying elsewhere
Buy with family and friends
The latest research also pointed out Aussies deem it to be near impossible for singles to buy a property themselves without support from a partner.
An anecdotal comment from the survey stated: ‘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.’
For this reason, Mr Edge recommends buying with family or friends to enter the property market sooner.
‘Teaming up with family and friends to buy property makes it easier to save for a deposit,’ he said.
‘However, with this strategy you must seek legal advice and make sure that everyone involved is fully on board with what to expect so the property doesn’t cause conflicts and relationship breakdowns down the track.’
Millions of Australians believe it’s becoming near impossible for singles to purchase a property, and for this reason Mr Edge recommends buying property with friends or family (stock image)
Spending less than you earn and living below your means is essential to save for a home deposit faster.
Mr Edge said unless you’re a high-income earner, you’ll need to cut back on luxuries, such as ordering takeaway food multiple times a week.
‘Lenders will look at you more favourably for a loan if you can demonstrate that you’re financially responsible and have a savings surplus each month,’ he said.
‘Living frugally will also set you up with some great lifelong financial habits and teach you how to manage money carefully.’
Spending less than you earn and living below your means is essential to save for a home deposit faster. Mr Edge said unless you’re a high-income earner, you’ll need to cut back on luxuries, such as ordering takeaway food multiple times a week
Do your research
In order to make smart financial decisions, it’s best to do your research, analyse your position and speak to an expert.
Mr Edge recommends thoroughly researching the property markets to get an ‘accurate understanding of the market value of the type of property you wish to buy’.
‘Look for similar properties in the same area that have sold recently, and the average days on market,’ he said.
‘Also, never purchase a property without doing your due diligence and ordering a building and pest inspection.
‘If this all sounds overwhelming, a buyer’s agent can help you through this process with their expert knowledge of the property market and negotiation skills, and by doing all the due diligence for you.’
FIVE GOLDEN RULES FOR PROPERTY INVESTING
1. Secure good finance: Mr Edge recommends speaking to a mortgage broker who can tailor your loan options.
2. Know the exact costs: Along with stamp duty and conveyancing there are often hidden charges like strata and document fees. And be sure to have a savings buffer for unexpected costs.
3. Understand the location: A strong local economy, quiet roads, nearby amenities and transport will make a difference to resale value.
4. Buy where there is room for development: A growing area with private and public infrastructure being built will increase demand.
5. Follow the leader, not the herd: Experienced investors with proven track records will usually be ahead of the crowd. Following them will get you into an area before it is saturated.