Trending topics: First time home buyers face a changing market

The modern real estate market is facing changes and challenges that would have been hard to predict 30 years ago.

So it’s little surprise the great Australian dream of owning a home with a veranda out the back is evolving.

We’ve discovered the facts and figures behind this change, and what that means for both first-time home buyers and the rest of the market.

How home ownership is changing: the figures

The number of homeowners, including first-time home buyers, is declining, largely due to house prices nationally soaring four-fold over the past two decades.

According to the ABS, home ownership rates have fallen 4% in 20 years, from 70% of households in 1998 to 66% in 2018. Looking at NSW specifically, we’re witnessing an even greater decline in home ownership, from 44% in the mid-1990s to 29.7% today.

The same data also shows that more of us are in debt too, with 40% of Australian households having paid off their mortgage and been mortgage-free in 1998 compared to only 30% in 2018.

Looking more closely at Census 2016 data for Ku-ring-gai Council area, you can see we’re a little different. 37.6% of homes were owned outright, 37.2% were owned with a mortgage, and 22.3% were rented. That makes a combined number of 74.8% of Ku-ring-gai residents on track to owning their own home, which is well above the national average.

This correlates with the demographics of the area, with over 80% of residents being established families who sought homes in the area to plant roots.

How the great Australian dream has changed

With buying a house feeling like an increasingly elusive financial goal, renting has undergone a renaissance, especially in more expensive capital cities such as Sydney.

As a result of the increasing cost of living and house prices, the threat of debt is more prevalent today, with only 30% of houses having paid off their debt as of last year, a 10% drop from two decades ago.

In the latest Perceptions of Housing Affordability Report, it was found that 63% of Australians still living with their parents said they couldn’t afford to move out of home. This intensified “cubby house” syndrome is symbolic of the pessimistic approach the younger generation has towards owning their own home.

These factors are all culminating in a stronger desire to rent. Additionally, when assessed on their financial state, accounting firm EY found that a renter was better off over a 10-year period compared with someone who had taken out a mortgage to purchase a home.

That doesn’t, however, negate the long-term benefits that are associated with property ownership, such as a higher standard of living when moving into retirement and greater financial stability.

These benefits, plus the recent price moderation of the real estate market after the significant appreciation period of 2014-2017, gives hope to those who would still like to live out their property-owning dream.

Why getting onto the property ladder is still important

Despite the potential hurdles and roadblocks, there’s no denying the pull of the property market.

In the September 2019 Genworth First Home Buyer Property Report, they found that 59.3% of Prospective First Home Buyers (Prospective FHBs) are proposing to enter the property market with a less than 20% deposit. One in three Prospective FHBs also intend to purchase an “entry-level home” to sell within five years and are seeking small apartments to get their foot on the property ladder.

This combined with a reliance on the “Bank of Mum and Dad” or Lenders Mortgage Insurance, shows that even with the additional financial challenges, first-time home buyers recognise the value of getting on the property ladder and are willing to get more creative to do so.

Owning your own home offers benefits like long-term security. The “family home” remains exempt from the retirement income review, making it a crucial asset when considering long-term financial stability (although there have been calls to review the existing policy).

Also, should you decide to sell your “main residence,” currently the Australian Tax Office exempts such sales from capital gains tax, meaning that you will receive more of the final profit.

Tips for first-time home buyers

Amidst the price rises and rising cost of living that has plagued the younger generation, there is a new wave of creative thinking that is aimed at getting a foot on that elusive ladder.

So, if you’re looking to save for your first home loan, how can you go about doing it? Some people have taken to more methods, such as long-term house sitting while saving up a deposit, or taking on extreme fixer-uppers. Others are choosing to get a foot on the ladder by “rentvesting”: buying where they can afford, and living in another area as a renter.

Researching the average prices in areas you’d like to buy into and making realistic savings targets are practical ways to help achieve your long-term goals. It’s also important to understand if you’re entitled to any government-supported schemes or grants, such as the First Home Buyers Assistance Scheme and First Home Owner Grant.

No matter where you are in your property journey, it makes a world of difference to talk to your trusted real estate partner to tap into their years of expertise and local knowledge.

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