If you’re a Gen Y-er struggling to get on the property ladder, we’ll pause to let you feel sorry for yourself for a moment. And rightly so – you’ve landed in a generation where house prices are through the roof, education is no longer free and you’d better not require any healthcare or you’ll be in debt for life.
To make things worse, every time you sit down to enjoy a nice craft beer you get some know-it-all Baby Boomer telling you it’s your lifestyle choices that are keeping you priced out of the market.
Ok, now pull yourself together.
There may not be a quick fix to your ownership problem, but there are plenty of small steps you can take to help that deposit build up a bit faster. And these are good financial management tips for anyone at any age, by the way.
Make a plan
It doesn’t matter whether you’re looking ahead one year, five years or a whole decade; the fact that you’re planning ahead is what counts.
As French philosopher Antoine de Saint-Exupéry put it: “A goal without a plan is just a wish.”
To get things started, all you need to do is sit down (with your partner if you’re in this together) and work out where you want to be in, say, 12 months’ time. Set yourself a savings target and then decide how you’re going to achieve it.
Don’t go into this blind. You stand a much better chance of getting in at the right time if you know the signs to look for and traps to avoid, so keep yourself informed about market trends and bore your friends by discussing auction clearance rates with them.
With some experts predicting an imminent slump in the property market leading to price drops of as much as 15% in Melbourne and Brisbane, you should be watching the situation like a hawk, ready to swoop in and grab a deal at the opportune moment.
Take an objective look at your spending and debt
It’s ok, you can keep that beer in your hand. But you need to really analyse your finances and be honest with yourself about where money is being wasted.
That expensive gym membership – is it really worth it? How about any other memberships or subscriptions you just haven’t got around to cancelling?
And when was the last time you checked how competitive your insurance rates are?
Co-founder and director of First Home Buyers Australia Taj Singh has some money-saving suggestions:
“Some of the stuff includes taking your lunch to work … and also using public transport where you can rather than driving, especially in states like Sydney, Melbourne and Brisbane where there are tolls … it can prove to be quite expensive,” Mr Singh says.
He also recommends focusing on paying off any high-interest debt such as credit cards and personal loans. A few months of tough living to get those cleared will make a huge difference to the amount you can then save towards a deposit.
Make more money
We’re not suggesting that you’re not already trying hard to get a job/a better job/a job with more hours. But if you need a cash boost, try getting creative.
Depending on where you live, you may be able to use apps like Uber, Airbnb and Airtasker to make a bit of extra cash. A spare room could be worth a few hundred dollars a month if you rent it out. And while you’re clearing it out you might be able to sell some of your old things online.
You can even make money from a skill or talent, for example by offering private tuition or making things to sell.
Just make sure you understand your tax responsibilities if you start making money in any of these ways.
Automate your savings
Would you miss $10 a week from your pay? How about $50? $100? One of the easiest ways to start building up some savings is to set up an automated payment to a bank account you can’t touch. Arrange it so that the money leaves your account as soon as you’re paid, and you’ll be surprised how little you miss what was never there in the first place.
If you get a pay rise or a one-off lump sum, make sure at least some of the extra cash gets diverted to your savings fund.
Ask Mum & Dad
If your parents are in a position to help, ask if they’d be willing to loan you money for a deposit or go guarantor on your mortgage.
Mr Singh notes that many banks now offer loans specifically for this purpose, where only a portion of the loan is from a guarantor and the risk to the parents is therefore reduced.
“Some of these involve a family pledge where [the] parents make a pledge for a certain amount of money for the deposit,” he said.
“That is one thing that can help first home buyers save on mortgage protection insurance.”
If that’s not an option, would it be possible for you to move back in for a while? It might feel like a step in the wrong direction after you’ve experienced the freedom of living independently, but it’ll make a massive difference to the speed at which your deposit grows. Think of it as one step back to take two steps forward.
This should be done with a plan and timeline in mind so you don’t end up living there indefinitely, and you also need to agree ways that you will contribute – financially or otherwise – to the upkeep of the home.
Check out available grants and schemes
Although many of the concessions that once existed for first homebuyers have now been scrapped, there are still a couple that may be of use.
In Queensland a grant of $15,000-$20,000 is available for new homes, depending on the date of purchase, and there’s $15,000 on offer for new homes in South Australia.
Lower your expectations
Don’t expect your first home to be as big as your family home. It probably took your parents two or three steps to get to where they are now, and you should expect the same.
You may have to compromise on size and even location; searching further afield or considering a move interstate will instantly broaden your options.
Another option could be to purchase an investment property and keep renting the place you’re in, if the numbers add up.
Whatever you do, budget properly and know what you can afford in monthly repayments. Don’t let the banks tempt you in to borrowing more than you need or can afford to – they are, after all, just trying to make a profit.
It’s not all about owning a house
Although owning property can be a good investment, it’s not the be all and end all.
Accept that it’s a lot harder to get a foot on the property ladder than it was a decade or two ago, and do what you can to get ahead. With a bit of careful planning, sensible spending and disciplined saving, you will put yourself in a better financial position regardless of whether you end up owning a home.
Do remember that everyone’s situation is different and before making any big financial decisions you should seek professional advice.