Research conducted by the International Monetary Fund (IMF) highlights that the Australian dream of owning a home is declining with figures showing house prices are becoming out of reach for many household incomes.
Times have changed since the 1970s when Baby Boomers could afford their first home on a single income and jobs were stable – a stark comparison to what Gen Y face and today’s property market.
However as property prices always go up, and residential property consistently proves to be a statistically safe investment, how can young Australians get a foothold on the property ladder?
Here’s our top three tips to get Gen Y and first time buyers started on the property ladder and the path to financial freedom – because it’s never too early to start investing in property.
1. Buy to invest
One strategy that is becoming more common with Gen Y is to buy their first property as an investment, not as your principal place of residence.
It’s a matter of finding a way in that will benefit them financially in the long run, rather than buying a home to live in purely based on emotion.
An RP Data report of sales throughout 2013 also shows 39.4 per cent of capital city unit sales and 27.1 per cent of capital city house sales were below $400,000 – showing affordable opportunities for first-home buyers are still out there.
Researching to find high growth suburbs and opting to buy rental apartments or houses while living at home or renting a different property is a sound strategy to get started in property ownership.
Co-ownership refers to where two or more people share the ownership of a property; it could be with a friend, family member or your business partner.
By pooling your money with others for a deposit, you can fast track your way into the property market, and it also enables you to split all the costs of owning and maintaining a property.
Owning your own property in half the time you thought you could sounds like a great strategy, however there are some issues to consider, as it’s not for everyone.
You’ll need to consider a co-ownership agreement before you sign a contract just in case anything goes wrong, signing as either tenants in common or joint tenants with right of survivorship (there’s a big difference), and how you’ll finance your share of the property.
You should be investing with like-minded people with similar goals. Make sure you feel confident that your co-owner-in-mind is financially secure enough to make their repayments and are committed to making the investment work.
3. Guarantor’s support
House prices shouldn’t deter those ambitious and smart enough to enter the property market, but they may need to ask for help at some stage, be it from their parents or the bank.
While saving for a deposit can seem to take an eternity, and some parents are in the fortunate situation to able to help with the deposit, an increasing number are becoming guarantors for their children’s loan.
There are two types of guarantee - a supported guarantee where the parent’s home or investment property is provided as security over their children’s home loan, and an unsupported guaranteewhere the parent services the loan if the child is unable to meet his or her repayment schedule.
Either way, if you’re in a position to help your children, or they ask for help, then guarantor support can help them get started in the market.
And lastly seek the wisdom of experience
Provided you can afford it, you should get involved in property at a young age.
If you’d like to speak with us, or if you know anyone who may be interested in achieving financial freedom through property investment, call us on (08) 8932 8858.
Our friendly staff are always on hand to help. Get in touch.