While the elimination of stamp duty for first home buyers, of properties under 600,000, is expected to lure many new faces into the property market, there lies a greater concern about the affordability of owning your first home.
It has always been the great Australian dream to be a homeowner, yet each generation passed has had to succumb to a steady increase in the cost of living and climbing property prices.
For most, financial education is a generational matter – passed on by parents or grandparents. More often than not, we are lead to believe that we should work hard to buy a home for our families, as our parents did.
According to Marion Mays, Wealth advocate and CEO of Thalia Stanley Group, the median house price has grown to about 7-8 times the annual salary, which has tripled what it was for our grandparents when they were buying their homes.
“How this plays out is we are seeing a 50% decline in first home buyers in the under 30 age bracket, and a dramatic increase from buyers in their 40s and 50s.”
The harsh reality is that most young people can’t afford to buy their own home.
Therefore, when it comes to investing, most first timers are underprepared and have limited awareness of how best to utilise property as a vehicle for wealth creation.
Mays urges those stepping onto the property ladder for the first time to seek advice from experienced professionals before taking the leap.
“It’s really important to work with qualified professionals to guide your financial growth, and help you make informed decisions about your future,” she said.
Despite current stamp duty savings, they should consider using property investments as part of their financial planning scheme, as opposed to just fulfilling their homeowner dream.
“What people often fail to see is the restrictions they are placing on themselves when they buy their own home- focusing on the up-front gratification of the Great Australian Dream instead of looking at the long-term picture.”
However, with Australian personal debt at an all-time high, second only in the world to Switzerland, there is an increasing concern of vulnerability, should interests rates spike, for homeowners who overcommit themselves.
With many benefits applying to investing, such as the taxation depreciation, those who are interested in using property as a platform for wealth creation shouldn’t just have their sight set on just owning their own home.
Rentvesting, where you continue to rent where you live while investing money into other property, has proved to be a popular way for young hopefuls to enter into the property sector quickly.
But, the real question is how do you determine which is the better option for you?
“A common mistake that many people are making is relying only on their financial planner, bank, or even their accountant to help them make these big decisions – you need a team of experts who work with you towards your long-term goals,” Marion says.
Whichever way you decide to invest your money, allow for a buffer and don’t overreach. That way, should you have a rental vacancy or an increased interest rate, you are able to avoid the housing distress.
Providing you buy well, it’s an ideal time to enter the property sector, with sustained low-interest loans and a strong market sentiment. The key is to get the right team of professionals to advise you and look at the big picture.