Wednesday, May 25, 2022
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Can I Buy A Home In My Lifetime?


It’s no secret that with skyrocketing property prices, spiking debt-to-income (DTI) ratios, and decreased stable income, millennials and those with modest earnings have slowly been shut out of the Australian real estate market.

This has left many people asking the question: will I ever be able to buy a home in my lifetime? 

Well, while the dream of buying and moving into a new house in your 20s may not be for all, it might still be possible. Let’s answer this question for you.

The current state of the real estate market
Being forced to stay inside for two years of the Covid-19 pandemic and emerging into an unstable economy was bad enough. But now experts are suggesting that the future of the real estate market is also going to take a turn for the worse, especially for young adults. 

According to a report by McCrindle, housing prices have exponentially increased in every major Australian city since the 1980s. 

In central Melbourne, the average cost of a house has shot up from $44,000 to a whopping $962,250 over the last four decades. That’s a blistering 22-fold increase! 

To make things worse, the average wage has only increased 6 folds in the same period of time. As a result, homeownership rates in Australia have been decreasing steadily over the past few years and fell to 66.2% in 2018 — its lowest level in over five decades.

But what’s the cause of the real estate madness?
In 2021 alone, property prices rose by a hefty 23.7% in some parts of the nation. This statistic left many people wondering what’s causing the property market frenzy.

Well, there are numerous reasons why property prices seem to be on a constant upward trajectory. Firstly, lower mortgage rates plus easy borrowing in a limited market have created an increased demand for homes.

Secondly, new incentives such as capital gains tax discounts have given an unfair advantage to investors as opposed to first-time owner-occupiers in terms of buying property.

Finally, due to the resilience of the real estate market to the pandemic-induced economic troubles, a large number of people are choosing to secure their hard-earned money by purchasing and investing in the already limited real estate market.

This means low sales and increased demand have boosted competition in the market, further increasing property prices. Similarly, the fear of the missing out sentiment shared by able buyers and investors has also propelled property prices to relentless heights, especially in major suburbs and cities.

How you can turn your dream into a reality
Now let’s answer the question on everyone’s minds: can I buy a home in my lifetime?

Well, the answer depends on your personal finances, the type of home you want, and the place where you’re looking to buy property.

But with appropriate planning, a pragmatic approach, and proper budgeting, it’s entirely possible to buy a home, even in today’s real estate market.

Plus, the government has started taking notice of the state of the property market and is taking steps to assist people in buying houses by creating new policies and introducing financial assistance schemes.

It has already introduced several home purchase assistance schemes that provide concessional loans, direct lending, and mortgage relief to low-income individuals in an effort to boost their access to property ownership.

A few examples of home purchase assistance that can make your dream of owning a home in Australia a reality include:

A few examples of home purchase assistance that can make your dream of owning a home in Australia a reality include:

– Owner-occupied Home Loans: As Homestar Finance explains, these loans are given to individuals who wish to purchase a home with the intention of living in it. Usually, these types of loans have much lower interest rates — with most below 3% — than other investment loans as owner-occupiers are considered safer than investors. However, they often have certain conditions and terms that prohibit you from renting out the house for a specific time period.

– First Home Owner Grant Scheme: Funded by the government and administered under its legislation, this is a one-off grant that’s available to low-income first-time homeowners who satisfy eligibility criteria.

– First Home Super Saver Scheme: Introduced by the government in 2017, this scheme allows eligible and aspiring first time home buyers to save cash for a property deposit using their superannuation fund. This allows them to contribute up to $15,000 in a year up to a total of $50,000 under the scheme. The best part? They receive the tax benefits of saving money through their superannuation arrangements.

– First Home Loan Deposit Scheme (FHLDS): This is a government initiative that was created to help first time home buyers tap into the real estate market sooner. Under the FHLDS, eligible applicants can purchase a property with as little as a 5% deposit, without needing to pay a lender’s mortgage insurance (LMI). Normally, buyers with less than a 20% deposit need to take out LMI.

– Family Home Guarantee: Initiated in July 2021, this scheme aims to provide 10,000 guarantees to eligible single parents with dependent children by 30th June 2025. This gives applicants the opportunity to either build a new home or buy an existing one with only a meagre 2% deposit.

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Source: Information, Drawings and Images
All article information is sourced and available for review from referenced locations.

– Information and Images supplied.

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