Rising Tide Blog

The great Australian dream is still within reach – it’s just a matter of rethinking it.

Posted by Matt Hale

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The great Australian dream of owning your own home is arguably as much a part of our identity as vegemite on toast.  But a report released last week by credit rating agency Fitch indicates that home ownership is becoming more and more out of reach for young Australians.

“The growth of the housing investor market has largely been at the expense of the first-time buyer,” the report said.

While it’s true that the number of first home buyers hit a record low in 2014, Founder of Rising Tide Financial Services, Chris Browne says the dream is still alive and well, it just needs to be approached slightly differently.

“Look, an inner-city quarter acre block is going to be off the cards for most young people but that doesn’t mean that home ownership is totally out of reach and neither is the financial security associated with it.  We come across a lot of young people who have read these kind of things in the media who have just thrown up their hands and assumed home ownership isn’t an option for them.  Often this just isn’t true,” he says.

Browne says the key to home owner success as a young person is taking the emotion out of the process.

“If you’re just starting out, stop looking for your dream home in your dream location and start looking at the best way to get in to the property market so that you can work towards owning your perfect home down the track.”

 Browney’s top tips:

Consider teaming up with a mate to co-buy your first property
Co-buying a property with a friend can be a great way to get your foot in the door of the property market.  Just make sure that the partnership is legally binding and overseen by a solicitor and a finance professional.

Look regionally to areas that are set to grow
Ten years ago Bendigo was the ideal place to buy an investment property.  Look to emerging regional towns that are close to infrastructure such as hospitals, schools and universities.

Talk to your mum and dad about helping you out by going guarantor on your loan
Your baby boomer parents are part of the wealthiest generation in Australian history so while this option isn’t available to everyone, it’s worth asking the question.  Keep in mind though that if your parents do agree to guarantee your loan, they’re putting their own assets on the line to help you.  Failing to meet your loan repayments can result in serious repercussions for your family so this is not something to be entered in to lightly.

Look at taking a home equity loan from your mum and dad
This is another option worth looking in to if your parents are apprehensive about going guarantor for you.  This involves your parents borrowing the deposit amount against their own home and lending it to you so that you can secure a loan for your new property.  In this arrangement you need to be prepared to make repayments to both the bank and your parents.

Stop being trendy
Inner-city suburbs are in high demand due to people wanting to live in the cool areas. So put your thinking cap on and consider areas that’ll be the next big thing. An example from a few years back is a patch of turf called Kingsville (in the Melbourne’s inner West).  If I could have my time again I’d buy the whole suburb!

Take the emotion out of it
Just because a property isn’t to your taste doesn’t mean it’s necessarily a bad investment. Talk to a financial expert, a mortgage broker, financial planner or your accountant and work out whether it’s going to be an effective long-term investment that will ultimately allow you to finance the purchase of a house you love.  For now though, adjust your expectations.