First home buyers' tactics change to get ahead
NO ONE can doubt that first time home buyers have it tough. But rather than wallow in self-pity, many aren't taking their struggle lying down.
Treasurer Joe Hockey might think it's as easy as getting a "good job that pays good money", but LJ Hooker research has found Generation Y is finding some innovative ways to get their foot on the property ladder.
LJ Hooker Coffs Harbour principal Paul Tobias said young property hunters in today's market had changed their buying habits to overcome issues faced in our evolving property markets, adapting the way they buy, use and invest in property to suit the way they want to live or to suit their budget and investment strategy.
"It seems to be the case that while policymakers and industry groups have been consulting on the best approach to help, the younger generation has been working behind the scenes to find innovative new ways of ensuring that they can secure their piece of the Australian dream," he said.
LJ Hooker research manager Mathew Tiller said there had been a number of factors that had influenced property hunters under 30 to explore non-traditional ways, but the biggest factor is price.
"The national average loan size for a first time buyer was $326,000 as of March 2015; a growth of 14% over the past five years and 58% since 2005. Price growth has also dramatically slowed the time it takes to save up for a deposit," he said.
The result has been a number of non-traditional buying trends emerging for Gen Y buyers.
According to LJ Hooker the most common new buying habit is that of the rentvester.
This buyer is currently renting, loves their lifestyle and doesn't want to relocate from the area where they are presently living. The problem is they can't afford to buy in this area.
Rather than disrupt their current lifestyle these buyers purchase a property in a more affordable part of the city or country and rent that property out while they remain as tenants in their current location.
Younger buyers have looked to overcome the affordability challenge by splitting and sharing the cost involved in purchasing a property.
They have done this by teaming up with a family member, friend or business partner in order to buy a larger property to live in together or as an investment.
Mr & Mrs fix it
Young families have looked to get into a larger house in their preferred area by purchasing an older smaller home which usually sits at the bottom of the price scale for the area.
Generally, these properties are in need of major renovation; however, they allow buyers to add rooms and levels as their families grow.
Build 'em up
Another more affordable way for young families to get into a new house is for young buyers to move out of their local area and into a newly built suburb.
This has seen demand for house and land packages in new estates rise considerably over the past few years.
For those not willing to compromise on location, purchasing a vacant lot and building from the ground up has also been away to remain within their preferred area.
Using parents' equity
Parents have ridden the property cycle over the past few decades providing many with a hefty equity uplift or outright ownership of their homes.
This has in turn allowed them to use their financial position to go guarantor on their children's mortgage or stump up some cash to help out with the deposit.
Recent research by the NAB shows that first home buyers are increasingly turning to their parents for help in order to get into the property market. They found that 6.7% of first home buyers now use the NAB Family Guarantee; up from 4.8% in 2010.