Social Commentary

Millennials and Home Ownership: Tips and Tricks from Those Who Have Done it

To millennials the vision of ‘The Great Australian Dream’ has dissipated. Seen for what it is – the quarter acre block is a generational goal of a foregone time that was once considered achievable. A time when families would not lose sleep concerned about the implications of the Reserve Bank increasing interest rates and servicing a mortgage was not as onerous on a family’s budget. The home ownership prospects that our parents enjoyed decades ago unfortunately have not been extended to Australian millennials.

The Australian housing crisis, often referred to as the ‘housing bubble’, saw housing prices rise exponentially between the years of 2011 and 2017, so much so, that the International Monetary Fund declared that Australian housing is considerably more expensive than ever before in history. This change in housing prices has occurred upon the backdrop of record low wage growth, unsustainably low-interest rates and unprecedented household debt. Consequently, the prospects for millennials seeking to get their foot in the door of the housing market is undeniably bleak.

Australian millennials have the second-lowest rate of home ownership in the world, according to a study that also reveals house prices are growing much faster than wages.

More than four-fifths (83%) of Australian millennials surveyed said they intended to buy a home within five years, but the report’s authors suggested this was optimistic. Australian capital city house prices have grown by more than 10% in the past 12 months, while real salaries were only projected to increase by 1.6%.

The study by HSBC bank says only 28% of Australians aged 18 to 36 own the home they live in – a situation only narrowly better than the United Arab Emirates.

The Guardian

Further, data indicates that age is a poignant factor affecting declining home ownership rates. In the 1960’s sixty per-cent of those aged between twenty-five to thirty-four owned homes, whereas in 2011 the rates of the same age group owning homes was merely forty-seven per-cent. The decline of middle-income millennials accessing the housing market paints a stark picture. This cross-section of society is struggling with housing particularly due to sky-high prices, tightening lending restrictions, the vast deposit required to obtain a mortgage and stagnated wage growth. Those between these ages are also most likely to get married and start families of their own, whilst having to climb the professional ladder. This age group therefore is placed under greatest pressure in achieving home ownership amongst other lifestyle pressures.

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Whilst the prospects of home ownership for the likes of people my age are grim, it’s all too easy to give up on the dream well before setting out to achieve it. I too at times am deflated by the commentary of those critical of the current Australian housing market and the odds of young people assessing the current market. Whilst the media is proliferated with stories about milliennials inability of assessing the market, rarely do we hear of the successes of young people in the market. In the rare instances that we do hear stories of young people achieving the great Australian dream, all to often there is mention of parental support and/or existing family wealth. In my opinion, there isn’t enough about the average Joe/Josephine entering the housing market to motivate and encourage the rest of us.

Newly entered the market

Questions:

  1.  How do you feel now that you have entered the property market?
  2.  At what stage/age did you start seriously considering entering the market?
  3. Did you genuinely believe it possible that would be able to enter the market at this age when you started thinking about entering the market?
  4. What sacrificies did you have to make to enter the market?
  5. What’s the best piece of advice you would offer to someone trying to enter the market?

Female (25) – Self Employed

Recently purchased first family home with husband

1. How do you feel now that you have entered the property market?

Very happy, relieved and proud. It’s very rewarding and all the hard work that felt never-ending has paid off!

2. At what stage/age did you start seriously considering entering the market?

My parents were always in my ear about saving to buy a property from a young age but  ‘we’ seriously started planning and working towards it when I was 22 and my partner was 24. We had just got engaged so we were looking for something to live in, instead of an investment.

3.Did you genuinely believe it possible that would be able to enter the market at this age when you started thinking about entering the market?

Yes I always thought it was possible. Funnily enough, when mentioned to older relatives or family friends, it was them that didn’t take it seriously and felt as if they thought it wouldn’t happen! In saying that, when looking at properties week after week for a couple of years, and seeing the type of buyers we were up against (downsizers with larger borrowing power) it was disheartening at times. It all came down to the right place at the right time and having done plenty of research so we knew exactly what we were willing to pay for a certain property.

4.What sacrifices did you have to make to enter the market?

SHOPPING! Haha.

Don’t get me wrong, I still shopped, but I began to really think about need vs. want. I don’t drink or enjoy the clubbing/festival life, so I feel that wasn’t a sacrifice I needed to make (that many others may need to). I also never really ate out often to be honest, and catching up with friends usually involved coffee (cheaper). socializing was another sacrifice as for a long time I worked 2-3 jobs while studying so time was limited.

5.What’s the best piece of advice you would offer to someone trying to enter the market?

Someone once said to me, “when I’m older I will earn way more money than I am now, so I may as well just enjoy life as it will be so much easier to save when earning more”. This is not true. Start saving young, no matter how much you earn. First of all, it sets up good habits for later in life, and second of all, consistency is key. Put away money consistently every week/fortnight/pay cheque and you will be surprised how quickly it grows (in principle and interest once you have larger amounts). Have your savings in an account you never touch. Once the money goes in, treat it as untouchable – so work out how much you will need for the upcoming weeks/month so that you aren’t taking money out of it.

Set small goals such as “I want to have xxx amount by xxx date”. It keeps you accountable and gives you opportunity to celebrate small wins . Also, living at home rent free helps a lot – there really is no excuse to not save if you are in this position. Don’t take this for granted 

Do your research. We looked at properties for 2-3 years before buying. This requires patience as it’s not a quick purchase – it’s the most amount of money you will ever spend in your life.

Take your parents or other family members to the property to get their opinion. Having never lived out of home meant that there were certain things we didn’t know to look for (e.g. Is there enough wardrobe space? Where are the water pipes? Are there good schools nearby? If buying a unit or townhouse – getting access to the strata documents and looking at the sinking fund, how many people are within the strata/block).

Female (25) – Working Fulltime

Recently purchased first family home

  1.  How do you feel now that you have entered the property market?

Excited, couldn’t wait to buy and live in my own home.

2.  At what stage/age did you start seriously considering entering the market?

When I was around 21 – 22 years old

3. Did you genuinely believe it possible that would be able to enter the market at this age when you started thinking about entering the market?

Nope, and we wouldn’t of been able to do it without the help of our parents. Buying together with my partner also made it a lot easier.

4. What sacrifices did you have to make to enter the market?

Save save save, don’t splurge on shopping sprees etc

5. What’s the best piece of advice you would offer to someone trying to enter the market?

Work hard, save your money and don’t buy something you won’t be able to afford. Have a budget and stick to it.

Female (25) – Working Fulltime

Recently purchased first family home

  1. How do you feel now that you have entered the property market?

Anxious that if my rent doesn’t come in I’ll have to really budget to make my mortgage repayments.

2.  At what stage/age did you start seriously considering entering the market?

22- influenced by parents morals of having something to call mine.

3. Did you genuinely believe it possible that would be able to enter the market at this age when you started thinking about entering the market?

Not possible without the help of my parents. Helping me determine which house to buy and match my savings and cover stamp duty.

4. What sacrifices did you have to make to enter the market?

Can’t splurge on holidays or clothes/ shoe shopping. Had to really focus to save as much as possible and always ensure I have money in my account incase rent doesn’t come in.

5. What’s the best piece of advice you would offer to someone trying to enter the market?

Save and buy as soon as possible. Houses are always going to hold value. Don’t be turned off on buying something older.

Male (24) Working Fulltime

Recently purchased first family home with wife

1.  How do you feel now that you have entered the property market?

I feel happy and relieved.

2.  At what stage/age did you start seriously considering entering the market?

Two years before entering the market.

 3. Did you genuinely believe it possible that would be able to enter the market at this age when you started thinking about entering the market?

I only felt that it was possible because my partner and I laid out a long-term plan to enter the market.

4. What sacrificies did you have to make to enter the market?

Had to be financially prudent when it came to purchasing any luxuries or experiences

5. What’s the best piece of advice you would offer to someone trying to enter the market?

Be persistent and stick to your plan, but don’t be discouraged if you only stick to it for 90% of the time.

 

Preparing to enter the market

Questions:

  1. What are your concerns about entering the market?
  2. At what stage/age did you start seriously considering entering the market?
  3. Do you believe it possible to enter the housing market at this age?
  4. Why do you think you’re ahead of other people your age when it comes to entering the market?
  5. What advice would you give to a young person starting to think about entering housing market?

 

Female (23) – Working Fulltime and Completing University

Looking to purchase first investment property

  1. What are your concerns about entering the market?

I am concerned about the prospect of overextending myself and committing myself to an investment that I cannot service financially. I am also concerned about the prospect of a financial downturn and the devaluing of my investment after I have purchased it. I often also consider whether an investment property will have a positive or negative effect on my desirability to the banks in attaining a second mortgage for my first home (which I intend to purchase after my first investment property).

2. At what stage/age did you start seriously considering entering the market?

I started seriously considering entering the housing market once I started fulltime work.

3. Do you believe it possible to enter the housing market at this age?

It is definitely possible to enter the housing market at this age – the financially savvy peers from school that have entered the market can attest to that. If you live at home and are responsible and accountable for where your funds are going, investing in the property market is not impossible.

4. Why do you think you’re ahead of other people your age when it comes to entering the market?

I am in a privileged position as my work is fulltime and my salary is handsome in comparison to other people my age. By no means am I making one-hundred thousand, but I live at home and have the luxury of being able to save around 70% of my salary.

5. What advice would you give to a young person starting to think about entering housing market?

My advice would be to start saving at a young age. If I was savvier about my saving techniques at a younger age, I would have an investment property by now. I would also encourage you to talk to your friends and family about your goals and techniques that you use to save. I will never understand why talking about money and investments is such a taboo, particularly when you’re not gloating.

Male (23) – Graduated University and Commencing Fulltime Work

Looking to purchase  first investment property

  1. What are your concerns about entering the market?

The price, but I know it will fall. Having a large mortgage but I plan to have tenants to pay off the mortgage anyway. I guess generally just the fear of the unknown. I think it would be a lot easier once you have done it the first time.

2. At what stage/age did you start seriously considering entering the market?

In the last several years, it has always been my goal to enter young and something I have saved towards for many years.

3. Do you believe it possible to enter the housing market at this age?

Yes, very possible, especially with a full-time job. Be responsible with your money, or just don’t be an absolute idiot like 95% of kids.

4. Why do you think you’re ahead of other people your age when it comes to entering the market?

Because I don’t complain about the market or saving or money and just and get on with it. I have been saving since I was young and know how to control myself when it comes to spending – unlike many young people.

5. What advice would you give to a young person starting to think about entering housing market?

If you plan to enter, make sure you have at least 20% deposit to avoid LMI and a ludicrous mortgage that you’ll be paying off for 50 years. Make it a goal to save and stick to it. Don’t spent money on things you don’t need. It’s very possible, don’t be scared by the media.

Male (23) – Working Part-time and Completing University

Looking to purchase first family home

  1. What are your concerns about entering the market?

The volatile nature of prices and rates, as well as the unease of the global economy which could have knock on effects to our market and interest rates, thereby affecting the affordability even more so. (Prices could come down nicely though interest rates could raise sooner rather than later).

2. At what stage/age did you start seriously considering entering the market?

22/23- due to relationship and financial commitments.

3. Do you believe it possible to enter the housing market at this age?

Possible?-yes. Likely?-Maybe. Common?-No. It is difficult and unrealistic to many young people, particularly as our generation has shifted significantly in our perspective of what we can/should/and need to have. For example, we are more likely to be living at home or out renting at this age than generations before, which is also influenced by the high number of Uni students our generation has as opposed to those generations before too. The only people I know who have entered the market as a home buyer either work in the Trades or have gone guarantor with their parents.

4. Why do you think you’re ahead of other people your age when it comes to entering the market?

I wouldn’t say ahead because the market could go to shit and make the progress we have made redundant overnight, though to get where we have gotten to financially we have had to make cutbacks and decisions to spend less unless necessary. Working two jobs each has helped.

5. What advice would you give to a young person starting to think about entering housing market?

Every persons background (socially, financially and personally) is different, with some able to receive financial help from their family whilst others have to save hard on their own. I think just getting yourself prepared financially by saving and cutting back on unnecessary expenses helps a lot. You dont have to go skin and bones and find yourself not doing anything, simply find ways to spend and save smarter

6. Do you believe it possible to enter the housing market at this age?

Possible?-yes. Likely?-Maybe. Common?-No. It is difficult and unrealistic to many young people, particularly as our generation has shifted significantly in our perspective of what we can/should/and need to have. For example, we are more likely to be living at home or out renting at this age than generations before, which is also influenced by the high number of Uni students our generation has as opposed to those generations before too. The only people I know who have entered the market as a home buyer either work in the Trades or have gone guarantor with their parents.

Whether you agree that the pursuit of homeownership is more about accountability and being smart with your money, or you dispute the notion that homeownership is as easy as others make it seem, there needs to be more discussion and transparency between millennial. It is all too easy to get bogged down in the sentiment that homeownership is to be placed in to ‘too hard’ basket for our generation. It is important to celebrate the victories of those around us, acknowledge the sacrifices they made and continue to make, ask questions and try to learn healthy financial habits from others. I wish that I asked more questions, showed more interest in long-term financial decisions and had friends who spoke about saving and what their long term life goals were. As millennials our collective story of the pursuit of  home ownership isn’t as clear-cut as generations before us. Many of us will struggle, a lot of us will never enter the market and a select few will find ourselves entering the property market. Irrespective of what decisions we make and where we prioritise our money and energy, it is important to talk to one another and empower our generation to know what options are available and what steps need to be taken to achieve our respective goals.

 

 

 

 

 

 

 

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