If you are a potential first home buyer (FHB) you may be
feeling disheartened by doom and gloom in the media as to whether
younger generations will ever own their own home.
There is no doubt house price to salary ratio was lower in the
70s and 80s – often seen as an unfair advantage for baby
boomers. On the other hand interest rates by the late 80s were at
times crippling – who remembers 17%? Anyone who rode out 17%
interest rates probably thought they would NEVER pay off their
home. But they DO. And they DID. Historically, property prices
usually rise over time. Surprisingly most home owners end up coping
with market fluctuations, bringing up children and still doing
1990 vs 2015
Av. Interest Rate
Av. Monthly Repayments
Av. Monthly household income
Repayments as % of income
As you can see, even with a significantly lower
average mortgage in 1990 home owners weren't much better off
while interest rates were high.
So what else has changed?
In 2016 we earn much more but other lifestyle factors have also
changed. Finance is more readily available – how many of us
now have credit cards?
We've also moved on from a society that generally lived
within their means. We no longer save or lay by – it's
often easier and more instantly gratifying to
charge to a credit card!
Household mortgage debt has tripled in the last 25 years. One
survey links the trend of increasing debt to the introduction of
mortgage packages that allow homeowners to draw down on their
mortgage without having to sell their house. While this facility
can be a helpful low interest way of accessing finance it can also
increase the level of debt for those who don't use it with
So what is the 'home ownership' message from all of
this? Well, the road hasn't ever been easy. In fact...
If it was easy – everyone would do it!
Building wealth and financial security through property
investment has ALWAYS required a level of sacrifice and
self-discipline. Current home ownership statistics show 31% of
Australians rent, 36% have a mortgage and 33% own their home
outright. Those who benefited over time are those who put a
strategy in place and had the discipline to stick with it.
Is there hope for first home buyers?
Recent research shows Gen Y is the new generation of FHB and
they are starting to actively enter the market. We are also seeing
the rise of the 'rent investor' – young renters under
30 purchasing investment properties in affordable areas while
renting where they WANT to live.
So yes, it appears there IS hope for FHBs.
Do you want to be one of them?
Buying a property takes preparation and planning –
sometimes for years. So what can you do NOW to help you buy a home
in the future? Here are our top tips:
Research the market NOW and plan your goal
Work hard at saving a deposit
Pay your bills on time
Travel, good times and job-hopping have been the typical
lifestyle choices of Gen Y but this generation is evolving.
PREPARATION and PLANNING are essential to getting a foot on the
property ladder along with reining in extravagant living and our
penchant for instant gratification.
With a little sacrifice and self-discipline it may be more
possible than you think for our younger generations to afford
property. It may be even MORE affordable for Gen Y because there
are possibly TWO salary earners to buy the first property –
unlike back in the 70s. Let's prove the doomsayers WRONG and
take responsibility for our future!
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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