When Joe Hockey was asked about housing affordability for first home buyers early last week he offered the little gem of ‘getting a good job that pays good money’. Thanks Joe.
Low interest rates and huge demand have sent domestic property prices rocketing upward, with many hard-working Australians left feeling that their first home is out of reach. There also seems to be little sign of reprieve for aspiring home owners, with high demand making any significant price reversal unlikely in the near future. Whilst it may be harder than ever to buy that first home, the journey needn’t be overwhelming if you follow some simple, but crucial steps.
Saving for your deposit: This is a time to stick with the basics and avoid making some critical mistakes. If you are spending your money and saving what’s left, you’re doing it wrong. Instead, you should commit to strong savings targets week in, week out, and spend what’s left. Completing a detailed budget planner will provide good perspective on your real costs each week and let you look over your expenses in an objective way. Saving for your home deposit may be the longest project that you have ever embarked on and it’s a war of attrition. Avoid unnecessary purchases wherever possible and if you must spoil yourself, set a savings target for you to reach to ‘unlock’ that purchase. If you’re still struggling, get in touch with a Financial Planner who can study your cash flow in detail and find the opportunities to fast-track your savings.
Take advantage of available grants: The grants available to first home buyers continue to be scaled back, with specific entitlements varying from state to state. Nevertheless you should learn more about the differing entitlements available, for instance if you were to purchase or build a new home rather than buy an existing home you may be eligible for a larger grant. For further information go to http://www.firsthome.gov.au but remain mindful that these grants will continue to change in the future.
First home, not dream home: Buying your first home can be a wonderful experience and it’s easy to be swept away from objectivity when picturing the new lifestyle that will follow. Herein lies the challenge: high debt levels and a low asset base mean that your first home is perhaps the biggest financial decision that you will ever make, and objectivity is paramount. We don’t finish university to apply for CEO positions. Property is no different. You’ll have time to work towards your dream home. It may be best that you pass on that gorgeous open-plan home (with a huge mortgage to boot) and look for something more within your means.
Don’t be rushed: What’s worse than spending six or more months looking for your first home and being outbid at each auction that you attend? Buying the wrong property in a red-hot market to later learn that you paid 2019 prices for it. Hopefully, you’ll be the beneficiary of some nice capital growth to help you build equity in your property which may position you well for your next upgrade or investment. Consider using an independent professional such as a Buyer’s Advocate who can offer rational guidance on which properties to consider and what to pay for them. This advice can be invaluable during the highly emotional home buying process. Purchasing a home means making a big investment in the property market – take the time to get it right.
Joe’s helpful suggestion was a reminder that good advice can be hard to come by. His comments may have been somewhat out of touch however he did get one thing right in that his advice was focused entirely on the fundamentals. Long-term success is almost always achieved by getting the basics right day in, day out. Your first home purchase is no different and consistently embracing the right financial habits will give you the best chance of having house keys in your hand sooner.
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