Affordability Challenges for First Home Buyers - Nfinity Financials

Affordability Challenges for First Home Buyers

By: Nfinity Financials0 comments

Even though you’ve been saving money every month for a down payment, it seems like costs are going up quicker than you can afford them.  It feels like that old dance of “one step forward and two steps back”. Frustration keeps rising and you become disheartened. Here we will discuss some major affordability challenges for first home buyers.

The current scenario of First Home Buyers somewhat seems like they are doing ChaChaCha. The usual first-home buyer couple can no longer afford the loan installments on an entry-level house. In the major cities of the country and certain areas, even flats are becoming unaffordable.

According to the Domains First Home Buyer Report young couples would need to put upward of 40% of their income toward mortgage repayment. 

Further, it has been shown that Sydney buyers between the ages of 25 and 34 were to buy an entry-level home, 57.2% of their salary would go toward paying down their mortgage. Although buyers are approved for such loans. 

Melbourne purchasers purchasing an entry-level home at the 25th price percentile ($678,000) would have to pay back 45.4% of their salary.

The standard for measuring mortgage stress is 30% of income being used for repayments. However, loans for entry-level homes in Canberra (48.3%), Brisbane (42.7%), Adelaide (42.1%), Hobart (40.3%), and Perth (31.2%) would all exceed this threshold.

According to the Chief of Research and Economist Dr. Nicola Powell, over the previous 5 years, the percentage of income required for entry-level homes increased by 18% points in the combined capital cities, and it increased by 7% points for apartments.

However, the time taken to save a 20% deposit had eased marginally in Sydney, Melbourne, and Darwin. 

Even so, it would take the First Home Buyer six years and eight months to save up a deposit on a Sydney property. If they save a fifth of their monthly post-tax income, they will also need to save for 4 years and 6 months.

Saving time would be more than 5 years in Melbourne, Brisbane, Adelaide, and Canberra. Perth and Darwin had the shortest period, less than 4 years for houses and less than 2 years and 6 months for units. 

Affordable housing, or moderately priced homes for people on low to middle incomes, is hard to come by, whether you’re looking to buy or rent.

Even, every economist and analyst believes that the amount of time has decreased little from the previous year. However, the majority of Australians who have seen income growth and consistently save large sums of money are affected by this decline.  

That may not be the case for a large number of prospective buyers. Because of the crisis in the cost of living, the situation has grown much more difficult for first-time home buyers. Paying historically high rent has made saving more difficult. With the ABS data and research, it has been proved that high rent impacts savings and it is difficult for first-time home buyers to buy their home without help. 

New Insight

According to new research from ABS, a quarter of renting households had an income of at least $140,000, as it is increasingly difficult to buy a first home without family help. 

High rents have impacted the buying the new homes. Also, AMP, chief economist Shane Oliver said that first-time home buyers face certain challenges. Moving ahead we will be focusing on the challenges for First Home Buyers.  

Key Hurdles for First Home Buyers

It was observed that getting a first-time house is becoming more and more dependent on parental resources. It can be from an inheritance, a direct cash gift, or just staying in the family home without paying rent. The average age of Australians purchasing their first home rose from 26 in the late 1960s to 31 in the mid-2010s, indicating a decline in the number of younger people making this decision.  

Let’s examine the issues that first-time homebuyers face and find some answers to these typical issues.

  • Savings for that deposit: The key to saving for that sizable deposit is to establish and adhere to a target early on. This will need a great deal of preparation, investing research, giving up non-essential spending, and possibly even moving back into your mother’s house from your rented apartment. Every effort should be made to save money, and every move you take to reach your objective must be well-planned.
  • Increase in property prices: Real estate in Australia is incredibly expensive, as everyone is aware. This reality is (understandably) one of the primary reasons young buyers struggle to buy their first property, according to a recent FHBA poll.
  • Getting the right help: For first-time homebuyers, there are other helpful resources than buyer agents. Indeed, according to an FHBA survey, nearly 40% of participants said that mortgage brokers offered the most beneficial assistance when purchasing a property.

A Good mortgage broker may give you access to a wide range of financing options and insightful guidance, making the process of obtaining a house loan easier. Having access to the right credit products will make getting a foothold on the real estate ladder more than just a pipe dream.

Short-term planning and infrastructure neglect

Similar threads are leading to the inflation of property prices, even though various areas of the problem require unique remedies. Ad hoc and ill-thought-out land supply programmes are a major contributing factor. Governments have avoided long-term strategic planning since the 1970s in favour of investing money during the election cycle. This includes land release programmes and the careful distribution of essential infrastructure, such as roads, trains, water, electricity, and telecommunications.

It is exactly because it is so hard to strike a balance between urban growth and sustainability and consolidation that strategic planning is required. Poor planning naturally results in poor budgeting, especially when it comes to major projects. As a result, social infrastructure is underfunded.

And then there’s stamp duty, the inflator of guaranteed house prices. Developer fees are now viewed by governments as a low-profile, speedy fix for decades of infrastructure neglect. The first home buyer will pay these fees in addition to the price of the house and land combination. Thus, the infrastructure that the entire community will use is funded by first-home buyers.

These drawbacks will keep hindering home buying in the Australian market. But every problem has its solution. Our next section talks about gaining home ownership.  

Road to Home Ownership

When homeownership seems to be slipping through your fingers, how do you reach out and grasp it? Here are five strategies to make buying a home more affordable.

Buy Duplex

Another option would be to hunt for a property with separate living quarters or a guest house, commonly known as a “granny flat”. To reduce your mortgage payment, occupy one side of the property and rent out the other. Although it’s not for everyone, becoming a landlord might be a terrific answer if you’re ready to put in the work. Just make sure you’re informed of the most recent local rental laws and that you’ve equipped yourself to handle last-minute catastrophes like a burst heating system or a flooded bathroom.

Get a roommate

You may have assumed that your time with roommates ended when you graduated from college, but you shouldn’t write them off just yet. One excellent option to split the cost of a property is to live with a roommate. To promote a happy home and a good fit, it’s beneficial to talk about rules and policies in advance. Differing views on acceptable cleanliness standards or the length of time to leave dishes in the sink can rapidly cause tension in a household. Additionally, having a written rental agreement is always crucial, even if your best buddy ends up living with you.

Think of Airbnb

There are two methods for listing your house on Airbnb. You can rent out a single bedroom on a nightly basis, and the guest will have access to all of the common areas of the house. When the house is rented, you can also rent it out completely and go travel, camp, or stay with a friend. Having a home in a sought-after neighbourhood is advantageous if you intend to host Airbnb guests. However, that doesn’t have to entail a picture-perfect house with a view of the ocean. It might only be a small, neat house in a neighbourhood near a hospital or tourist destination. That can also work if there aren’t many or very pricey hotel options nearby.

Move to a less expensive area

This might be a little too much for you, but that’s ok. However, we all know that work from home is on the rise. And so, you can have the flexibility in where you can purchase a home. Just leaving a high-density location 20 or 30 miles away could result in a significant shift in housing costs. In certain situations, you may be able to reduce your housing costs by 50% or more if you’re ready to move across the nation.

Research loan options

Conventional loans typically have higher initial out-of-pocket expenses even though they frequently have the greatest interest rates. Check into different loan options. With the help of these loans, you may frequently purchase a home with little or no down payment. It’s worth looking at brokers who can offer you full support and help you make the right decision. 

At Nfinity Financials, Read our articles and also Book a consultation call at 1300 GET LOAN. we recognize the significance of ensuring that, when it comes to purchasing a property, you are making the appropriate choices.

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