Buying your first home: Is it still achievable in our major cities?

In recent years we’ve seen an explosion in housing prices in our major cities, particularly in Sydney and Melbourne. It’s a well-worn subject, and one that has seen plenty of column inches across all media platforms.

While recent talk of a downturn in the Sydney market is true, we’re talking a small percentage drop in a market that’s been growing at phenomenal rates for a sustained period of time.

It leads to an obvious question that we often hear: Have we reached a point where our first homebuyers are locked out of major metro markets like Sydney and Melbourne?

Price is an issue

The fact of the matter is that house prices in Sydney and Melbourne are ridiculous. That may be a bold statement, but what we’ve seen in recent years has made the market incredibly difficult for first homeowners to buy in the city in which they were raised. It’s now reached a point that, for singles relying on a sole income, it’s near impossible.

It’s also become a political football, with both sides of politics thundering from the sidelines about housing affordability. There are a variety of factors that have contributed to the price surge, including lack of supply, two vs. one-income households, an increasingly global property market, and the rise of property investors. It’s hard to say there’s one dominant reason, it’s more of a perfect storm of conditions that have contributed to the situation we find ourselves in.

There is still an opportunity

In saying all that, there’s still an opportunity if you’re focused enough to pursue it. Here are my tips to put yourself in the right position to still make it on to the Sydney or Melbourne property ladders.

Be disciplined on saving and stay at home longer

Parent’s reading this may be groaning right now! The best advice I can give you, in terms of saving, is to remove the cost of rent, if at all possible, by living at home for longer. It will put you in the best possible position to save for a deposit.

On the saving’s front, you need to ensure you’re disciplined in your approach. Start by setting a budget and sticking to it. You need to know where your money is going if you’re going to have any chance of success. Cut up the credit card while you’re at it and you’ll remove the temptation to overspend.

You could also look at using the First Home Super Saver Scheme. It gives you the opportunity to save using super contributions and then access that money with tax concessions when you need it.

One tip I always provide here: Don’t go overboard and remove everything fun from your life, that’s a sure fire way of failing to stick to your budget. Make sure you still have some funds set aside for the things you enjoy doing. One good way of doing this is to set milestones in your budget and reward yourself when you reach them.

Loan guarantor

As reaching the 20% deposit required to be eligible for many financial institutions becomes more difficult, many parents are looking at going guarantor on their children’s first home purchase. Depending on your own financial circumstances, it’s certainly something that can be a viable option.

It’s also worth looking at the various home loan calculators that are available to check out your options around getting a mortgage. We provide a Borrowing Power Calculator on our website and I highly recommend checking it out.

Be realistic

My final tip is to be realistic: While you might love to live in Paddington or Toorak, sometimes starting out means looking further out for your first property. You can also look at smaller options, like an apartment or townhouse, or a property that needs a bit of TLC to make it into your dream home.

It’s also worth remembering that you don’t have to own a home. Renting is a viable option, as long as you’re investing your surplus into other investment classes such as shares, so that your money is working for you.