Get creative to meet first home challenge
FOR those wishing to buy their first house, the dream of owning your own home is more challenging than ever.
With stricter underwriting criteria and increasing house prices, first home ownership is expected to decline further, especially among the younger generation.
Dr Kang Koo, lecturer in business and real estate within Deakin University’s Business School, explains that “as many media reports have already stated, the idea of owning a detached house on a quarter-acre lot near a major city will be more difficult. Potential home buyers may need to look at suburbs located further away from CBD areas”.
Considering living further from the CBD will help in terms of price, but it might reduce access to resources such as medical centres, hospitals, shops, supermarkets, educational institutions and workplaces.
An alternative could be buying an apartment or flat, which could provide closer proximity to city centres, or considering more affordable regional areas, which can offer a great quality of life. Some good news is that Geelong median house price growth has slowed in the past few years.
Dr Koo also noted that, given urban sprawl — particularly in Melbourne and Sydney — many Australians may have to change their expectations and consider high density living, which can also offer a good quality of life.
“Melbourne house and unit prices in particular have skyrocketed, making it more difficult for young people to find a house in the inner suburbs with an asking price at an affordable level,” Dr Koo said.
He believes there are a number of causes for this escalation, including population growth — resulting from relocation from other parts of Australia and overseas — changes in tax policy, changes in the economy, and the everchanging value of the Australian dollar.
According to recent ABS statistics, New South Wales lost 22,100 residents via interstate migration, while Victoria received 12,200 more residents in the year ending June 2019. A 2019 report published by the AfrAsia Bank and New World Wealth stated Australia had the highest net inflow of high net-worth individuals in the world in 2018, followed by the US.
“The impact of the negative gearing program or foreign investors on the increasing price of the property market has been studied and debated,” said Dr Koo.
If you are seeking to enter the housing market for the first time, Dr Koo advises that you “focus on the ability to deposit money for a downpayment and maintain a stable income stream.”
“Given that most first-home buyers are not outright owners, the amount of mortgage they can afford will be an important factor.
“And be realistic. It might be wonderful to design your own house on a good-sized block of land, but there are other options that could suit you just as well,” said Dr Koo.
“Unfortunately, there is no easy solution, but regular saving, research and considering a wide range of possibilities make owning your own place a more realistic option.”