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Is The Australian Dream Of Buying Your Own Home Over?

The “great Australian dream” is touted as owning our own home.  It is a cultural trait with the majority of Australians owning their own home.  But for many first home buyers, particularly in capital cities like Sydney and Melbourne, it is looking like this dream is becoming more and more unattainable.

Australians are facing a housing affordability crisis. According to the Australian Bureau of Statistics (ABS), over the last 20 years housing prices have increased faster and for longer than any time since 1880.  There is vast demand for Australian real estate, driven by tax incentives for local and international investors.  The ABS reports that first home buyers have declined by a third over the last ten years, even though the property market has increased overall. This suggests it is investors driving the property market.

According to The Economist Australian homes are now overvalued by as much as 40 percent.  As the property market slows, there are whispers of a market-correcting crash. This would surely be welcomed by first home buyers.  However, this argument is balanced with the notion that Australia currently has a robust population, sound banking system, strong business and consumer confidence and a culture of home ownership, which may mean we are unlikely to see a significant market decrease.

Australia is not alone in its housing affordability crisis. Countries such as Switzerland, England, Hong Kong and Canada face similar issues. With interest rates at record lows, should the Australian Government be looking at other initiatives to improve housing affordability? Could they consider reviewing foreign investment policies, expanding land releases and phasing out tax incentives for investors? All of these could be up for debate.

What can you do about it?

Until we see significant commitment from the Government to make housing more accessible and affordable for low to middle income earners, there are a few things you could consider implementing with the assistance of a financial adviser who has the knowledge and a professional services network to help you put a plan in place.

  • Start saving early – the earlier you start saving the better! Start to put a little aside each week to build your deposit and demonstrate a savings history.
  • Use parents as guarantor – if an option for you, this is a great way to enter the housing market.  Having parents go guarantor provides security to the banks, but it can impact their financial plan so talk to a financial adviser before you go down this path.
  • Look for properties outside your usual location – don’t disregard houses that aren’t picture perfect. You may have less competition which will get your foot in the door – and your first home does not need to be your dream home, you can build up to it!
  • Buy a property, then rent out one or more of the rooms – this is a great way to boost your income and make the cost of living more affordable. This will impact your tax so get some advice first.
  • Relocate – move to an area where housing is more affordable. You will get more for your money and may discover a brand new community that suits your lifestyle.
  • Buy an investment property – if you can’t find the property you want to live in, perhaps you could consider renting with others or living with family while you pay off an investment property and build equity.
  • Consult a financial planner in conjunction with a mortgage broker – a qualified financial adviser can introduce you to a mortgage broker and together they can help you work through some different strategies for entering the housing market. Knowing your options, what you can afford and your borrowing capacity is a great place to start.

If you would like to further discuss how you can enter the housing market or build your wealth by utilising other financial planning strategies, please contact Certified Financial Planner Elliot Watson on 0409 931 984 and start the conversation.

Elliot Watson Financial Planning Pty Ltd and its advisers are Authorised Representatives of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. The information (including taxation) in this article does not consider your personal circumstances and is of a general nature only – unless otherwise stated. You should not act on the information provided without first obtaining professional advice specific to your circumstances.

Elliot Watson

Elliot Watson*

Elliot Watson is an award-winning Certified Financial Planner with over 15 years' experience. He is passionate about helping people grow and protect their wealth.

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