The lower inflation rate, lower interest rates, but house prices are still getting higher.
Five (5) of Australia’s cities: Sydney, Melbourne, Adelaide, Brisbane, and Perth, were named as one of the top twenty-five (25) most expensive cities in the world when housing prices and average incomes are being compared, said Demographia International Housing Affordability Survey 2021. Just this April, Australian housing value lifted by 1.8% as the figures of CoreLogic’s National Home Value Index proved.
With Aussies being the most vulnerable in this situation, the recent Housing and Affordability & Sentiment Survey conducted by Savvy proved that nine (9) out of ten (10) Australians agree that, indeed, property prices are becoming “unaffordable”. With its nine-hundred five (905) respondents, 32.4% revealed that the main reason why they did not purchase a property for the past twelve (12) months is that they can’t afford it yet.
It can be observed, though, that the inflation rate is getting lower, and the same applies to the interest rate on housing. Additionally, loans have become much cheaper which gives its borrowers the capacity to borrow much larger sums. However, Christopher Joye, a contributing editor in the Australian Financial Review, stressed the realization that low-interest rate does not equate to affordability.
No doubt, the majority of the respondents said that the housing market is getting “out of reach” for Australians. In figures, 39.3% answered that they are “worried” about this and 32.9% responded that they are “very worried”, garnering 72.2% of people concerned in total.
Despite this, they still look for properties, currently, but for the sole purpose of resolving their fear of being shut out of the market if they will not buy in the near future. 29.8% of them agreed to devote 20% of their household income to housing necessities. In the finance industry, it is considered as “mortgage stress” if you allocate more than 30% of your household income.
Based on the survey, 26.9% of the respondents experience “mortgage stress”.
“We’ve had a general feeling that the housing market is out of reach for Australians, but it seems that COVID-19 and other measures such as HomeBuilder and the First Home Buyer Deposit Scheme have still left most would-be home buyers worried if they don’t buy now, they’ll be shut out forever. The fact that almost a third of people are in mortgage stress is also alarming; it could be a prelude to a much bigger crash,” uttered Bill Tsouvalas, Savvy’s Managing Director.
According to the Commonwealth Bank, they are forecasting that Australia’s house prices will continuously rise up to 16% over the next two (2) years in what they term as a “housing market boom”. Considering this, 37.1% of the respondents revealed that they still want to purchase, just because they feel pressured with the current situation.
Extra efforts will constantly be present in ensuring the respondents’ place in the housing market. There are those who said that they are willing to wait for a property price crash (or the bubble to burst); some would want to relocate instead, and just purchase a house in regional/rural areas. But, the majority would rather save more of a deposit to enter the property market.
So, where to from here?
John McGregor, a Sales Agent of 4one4 Property Co., believes that despite the recent findings if you allow yourself to expand your knowledge and think creatively, you can still be successful in securing a home. With that, McGregor shared some options and “life-hacks” which first home buyers can consider when purchasing a property without really breaking the bank.
Try “rentvesting”
The idea of rentvesting, in the simplest form, is renting a unit that matches your lifestyle while you also purchase your own investment property that suits your budget. With this home-owning strategy, you can enjoy the lifestyle that you want through living in a unit situated in a location that you prefer and paying your mortgage through the income that you generate from your investment property.
Mcgregor said rentvesting is a practical decision to make. “Rather than having to pay a million dollars to live in the city, you can rent cheaply, and then invest in a property somewhere else,” he added.
Maximize government grants
One of the initiatives of the Australian government is the HomeBuilder grant where it provides assistance to eligible owner-occupiers and first homebuyers in building a new home or renovating an existing unit. Based on the information available in Treasury’s website, “a $25,000 grant is available for eligible contracts signed between 4 June 2020 and 31 December 2020 (inclusive). A $15,000 grant is available for eligible contracts signed between 1 January 2021 and 31 March 2021 (inclusive).”
McGregor, on the other hand, reminded potential homebuyers to not just take advantage of the grants because they are available. “Make use of them if they only make sense to you and if they fit with your plans,” he stressed.
Have a smaller checklist
It’s innate in everyone to have a set of standards when pertaining to their dream home. However, in buying your first home, McGregor advised to remove all your “must-haves” from your list. He explained that having a lot of “must haves” makes it more difficult to buy a home; instead, just trim them down and only consider the most essential ones which are gearing towards your plans.
Although the market is, indeed, though, at the moment, there are still opportunities to be found in other parts of Australia. You just have to open your mind and think creatively. You might also want to consider the options written above in securing your first home, or you may also coordinate with our team at 4one4 Property Co. for any additional questions (we’re willing to help you!).
At the end of the day, in McGregor’s words: “Your first home doesn’t necessarily mean it’s going to be your last home.”
