Gen Y and the property market

It has so long been said that the great Australian dream was to one day have a home that was yours and yours to own. With a big backyard and, in the words of Bob Brown, “a clothesline out the back, verandah out the front and an old rocking chair”, these envisions formed the basis of what was once said to be great Australian dream

Aside from the old rocking chair, it is a dream that many young Aussies hope to one day achieve. Only problem is that this great Australian dream is becoming increasingly ‘just a dream’ as apposed to an achievable reality, especially for us Gen Y’s.

Today the average house price in Sydney is roughly 9 times the average income. Our predecessors however, the baby boomers, lived in an era where the average house price was only 3 times the average income. Yes we might be earning more but the affordability of a home has skyrocketed.

Without the risk of sounding too disheartening there are still many ways for us Gen Y’s to crack our way into the property market, if not there already, and start paving the path to one day owning our own home.

Consider investing

Property investing may seem like a very complex concept to some, when in fact it is a lot simpler than people may think. Investing in property can allow you to reap financial rewards in the long term, as well as short term if you play your cards right, without having to put yourself too much out of pocket. If you’re dream home is essentially out-of-your-league, or the thought of paying off a mortgage just doesn’t suit you’re lavish lifestyle, then property investment might be the right option for you.

The main goal for property investment is capital growth. That is, the increase in the value of your property over time. The main benefit of this is that you can eventually use this as equity into the deposit for your dream house, or for further investments.

Advantages of investing are that one would generally have the place rented out to tenants, which can significantly reduce the money you are out of pocket. It is also beneficial come tax time when you can claim back all expenses and negatively geared losses.

Disadvantages of investing are that, at the end of the day, it is still a risk and there is no 100% guarantee that your property will increase in value. If however you do your research correctly, using the vast amounts of resources available, you can surely look towards a positive property investment.

Don’t go it alone

In the fast paced society we live in, full of social temptations, material temptations and many more, it is becoming increasingly difficult to see the numbers in that savings deposit go into the four digits, let alone the five or six.  Therefore many of us are choosing to become involved in joint ventures to be able to enter the property market.

Joint ventures are not only limited to buying a property with your partner or your spouse. It is becoming more and more common for friends or family members to put their dollars together and purchase property under dual, or even triple names.

The advantage of this alternative is that you’re options become more widespread as the bank will tend to loan you more based on two incomes. This way you can afford to perhaps spend a little more on a property with higher growth prospects or in a high growth area.

One thing to note when undertaking a joint venture is that it is advisable to seek legal advice beforehand, just to be cautious.

No one likes the word budget

How many times have you told yourself that you were going to write up a budget? Or browsed through the online app store and came across a budget app that seemed useful when in fact just stuck itself to your iPhone screen blending in with all the other colourful productivity apps never to be used?

Truth is we all know deep down where we can save the extra dollars. It’s just a matter of when we will get the motivation to do something about it. Perhaps it’s that daily coffee or three, or the online shopping habit that is so quickly decreasing all the space in your wardrobe. There are certain things in life that we can live without so in order to strive for something that will benefit you in your middle ages and beyond, you must have a little bit of self discipline and perhaps look into cutting out some of those not so necessary necessities.

Ask the oldies

And I don’t mean “Dad can you please buy me a house?”

Asking your parents to be guarantor on your property simply means that they will take on the responsibility of paying off the loan if you happen to no longer be able to meet the financial commitment. In saying that, the guarantors will have to use the equity in their own property as security for the loan.

It may seem like a big ask however if you’re parents are more than financially secure and are willing to assist then it may be worth contacting the various banks that offer this option and discussing the fine print.

Competition in the market

There are many banks out there that want your money. Therefore there is room to negotiate and shop around. Do your research; organise meetings with a few lenders before signing up to anything; get a feel for what loan suits your current situation.

Mortgage brokers are a good place to start if you are unfamiliar with the lending market. Mostly they are free of charge and are there to help you get the best deal.

The reason why shopping around for the best deal is important is because although point one of a percent might not seem like a lot, when you’re dealing with such large amounts of money over such a long period it can certainly make a huge difference. E.g.:

500,000 * 5.1% = $25,500 * 30 years = $765,000

500,000 * 5.0% = $25,000 * 30 years = $750,000 ($15,000 saving)

Earn more money

This might seem like a very broad statement however there are actions you can take which can result in that pay rise you’ve been waiting for.

I’ve always been a firm believer in the saying “If you don’t ask, they can’t even say no.” It pretty much sums up a lot of our hesitations in life. Not to say that you specifically need to ask for a pay rise, rather ask for any more opportunity or responsibility over and above your current job role. Showing interest in higher responsibilities and putting your hand up for opportunities at work shows commitment and employers love this. If they don’t know you’re interested you can easily be overlooked for promotions.

If you feel you need more qualifications to take on higher roles then perhaps taking a short course might give you what you need. There are many institutes that now offer online learning to assist with the time constraints of working adults and you’ll find that many of the courses are nationally recognised.

On a more dramatic level if you’re feeling unhappy in your current role and are looking to take a different career path, look for other roles and opportunities in the workforce even if it means searching elsewhere. There is always career help and guidance available, whether with your current employer or online.

The decision to get into the property market is not an easy one, neither is the action required to make it happen, but know that it’s possible and as with many of life’s other important milestones, it will reap a very rewarding result in the end.