Struggling to Buy a House? You're Not Alone | Tips to Secure Your First Home in 2024

Summary

Australia's affordability crisis is hitting hard, with interest rates and living costs soaring, making it difficult for first-time home buyers to enter the market. The average income needed to service a new mortgage has risen significantly, especially in cities like Sydney. The video offers three tips for first-time buyers to navigate the challenging market, including exploring government schemes, considering different locations, and recalibrating expectations. It also highlights common mistakes to avoid, such as underestimating extra costs and the importance of pre-approval. The concept of 'rentvesting' is introduced as a strategy for affordability, suggesting that buying an investment property in a more affordable area while renting in a preferred location is a growing trend among young Australians.

Takeaways

• 🏠 Australia is experiencing a housing affordability crisis, with interest rates and cost of living increasing, making it difficult for first-time home buyers to enter the market.
• 📈 The average income needed to service a new mortgage has risen significantly, especially in cities like Sydney where it now requires 74% of take-home income.
• 💰 There is a growing trend of people, like the client Gemma, moving back home due to unaffordable rent increases.
• 🏡 The video offers three tips for first-time home buyers to enter the market sooner: explore government schemes, consider different locations, and recalibrate expectations.
• 💼 Government schemes like the home guarantee scheme and home equity scheme can help buyers with lower deposits, and grants are available in some states for new properties.
• 🗺️ Buyers are encouraged to look beyond their immediate area to find more affordable housing options.
• 🔄 The idea of a first home not being a forever home is gaining traction, with units becoming a more common starting point for buyers.
• 📊 Rentvesting, or buying an investment property in an affordable area while renting in a preferred location, is a growing trend among young Australians.
• 💡 The video highlights the importance of understanding additional costs beyond the mortgage, such as body corporate or strata fees.
• 🏦 The significance of pre-approval is emphasized, as it helps secure a confident loan amount and avoids surprises during the property purchase process.
• 🤝 Working with a mortgage broker can provide a wider range of options and help navigate the complexities of the housing market for first-time buyers.

Q & A

What is the current affordability crisis in Australia's housing market?

Australia is facing a significant affordability crisis with interest rates up and the cost of living increasing, making it difficult for first-time home buyers to enter the market. The average income needed to service a new mortgage has risen to nearly 49%, a substantial jump over the last decade.

How has the housing market affected cities like Sydney?

In cities like Sydney, the affordability crisis is more pronounced, with home buyers now needing 74% of their take-home income to service a new loan on a house, highlighting the difficulty of entering the property market.

What is the case of Gemma from Melbourne illustrating?

Gemma's case illustrates the struggle of renters whose rents have increased significantly, making it unaffordable for them despite having an average income and living a frugal lifestyle. As a result, she joined the trend of people moving back home to save on rent.

What are the three tips provided for first-time home buyers to enter the market sooner?

The three tips are: 1) Explore government schemes like the home guarantee scheme and home equity scheme to buy with a lower deposit. 2) Consider different locations beyond the immediate area to find more affordable options. 3) Recalibrate expectations, considering properties like units which might be more affordable and suitable as a stepping stone to home ownership.

What is the home guarantee scheme mentioned in the script?

The home guarantee scheme is a government initiative that allows first-time home buyers and single parents to purchase a home with a minimum deposit of 2% and 5% respectively, facilitating entry into the property market with a smaller upfront cost.

How can government grants help first-time home buyers in certain states?

Government grants, such as those available in Queensland for buying a new property, can provide financial assistance ranging from $10,000 to $155,000 depending on the estate, helping first-time buyers to gather the necessary funds for a deposit.

What is the common mistake of underestimating extra costs when buying a property?

Underestimating extra costs refers to not accounting for additional expenses such as body corporate or strata fees, which can significantly impact the amount the bank is willing to lend and the overall affordability of the property.

Why is getting a pre-approval important for first-time home buyers?

A pre-approval is important because it provides a clear understanding of how much a bank is willing to lend, allowing buyers to make informed decisions. It also ensures that the bank has fully assessed the borrower's financial situation, including unique incomes like overtimes, commissions, and bonuses.

What is the concept of 'rentvesting' and why is it becoming popular among first-time home buyers?

Rentvesting is the strategy of buying an investment property in an affordable area while renting in the preferred location where one wants to live. It is popular because it allows buyers to enter the property market and potentially benefit from capital appreciation without compromising their lifestyle or being priced out of their desired living area.

How can a mortgage broker assist first-time home buyers in navigating the housing market?

A mortgage broker can assist by comparing different banks and policies, understanding how various lenders assess borrowing capacity, and providing a wider range of options tailored to the buyer's financial situation, including considerations for overtime pay and rental income.

What is the average time taken to save a deposit for a first-time home buyer?

The average time taken to save a deposit has increased to about 10 years for a minimum deposit, reflecting the challenges in the rental market and the difficulty in affording one's own home.