Buying a first home as a couple can be a tough task in many parts of Australia. It can be even harder when single. But many young Aussies who are right now flying solo have no wish to wait until they meet Mr or Mrs Right before buying. There can be many reasons for this.
Some Aussies want to get their foot on the property ladder ASAP. Others feel buying now would make the most sense for their personal financial goals. And some may have gotten a promotion that skyrocketed their income, or a windfall that they want to use right away. Whatever the case, there’s a lot to be said for buying a first home when single, but there’s challenges too.
So let’s look now at the pros and cons of being a first home buyer while single.
Pro: It Can Be a Great Move Financially
As a general rule, the sooner you can buy your first home the better. There’s no need to sprint to auctions like Usain Bolt doing 100m, but there’s many factors that make ‘sooner rather than later’ the best course of action.
After all, at the end of the first year of the Bachelor Australia’s premiere in 2013 the median house price in Sydney was $722,718. At the end of 2017, after its forth season ended with Sophie choosing Stu, anyone choosing to buy a home in Sydney needed to confront a media home price of $1,179,519.
Across many markets home prices in Australia have been rising for many years. Recent months have seen well-documented price drips across Melboune, Sydney, and Brisbane, , but anyone waiting to pick up a flat in Bondi for $1000 will be waiting a loonnnnng time.
While house prices keep going up, unfortunately wage growth has generally not kept up. This means the gap between average earnings and the price of a home is only set to grow further.
Buying your own home is a great way to put the brakes on this, and buy a property now you have a deposit for now, and could meet the repayments on comfortably (something that could becom harder and harder into the future if prices do keep rising). It also means once you’re a home owner you can surf the wave of rising home prices, so maybe one day you can resell your first home at a profit, and then use that profit to buy into a property you like even more. If you don’t buy a place now there’s no chance to do this.
Con: Your Borrowing Capacity May Be Less
Generally speaking, your borrowing capacity will be lower when you borrow by yourself. If you’re on a really high income, this may not be an issue, as you’ll likely still be able to borrow enough to easily get over the line, and into your first home.
But if you’re looking to something around or over $500,000, and you earn an average salary, you may find your borrowing capacity by yourself is below that.
There’s actually a fair bit of debate around now about what exactly the average Australian wage is these days – news earlier in the year the average Aussies wage was around $84,000 was a bit of a showstopper! – and it’s since been shown that figure is pretty damn flaky.
But either way, if you’re sub $80,000, and earning a respectable $50,000, $60,000, or $70,000, you may struggle to borrow over $500,000.By no means does knock out a ton of great homes still being available at a lower price point.
But if you’re maybe planning to ‘put the wagon before the horse’ and buy a family home in anticipation of meeting someone in years ahead? It may be necessary to step back and reassess your options.
Especially because alongside a smaller borrowing capacity, there’s the deposit factor. Ideally to get a loan lenders like to see 20% of the total home value saved. For a $500,000 property that’s $100,000! You can get a loan with a smaller percentage, but then other things like lender’s mortgage insurance may kick in.
And as a result of the revelations from the Royal Comission into Financial Services, the era of free wheeling lending is indeed over, and it’s possible it may tighten further.
Pro: Aiming for Your Goal Can Be Easier
Buying a first home when your single can get you access to a range of benefits. Across Australia first home buyers commonly get a reduction in costs like stamp duty and transfer fees via their state or territory government.
If your the Bachelor’s current star Nick Cummings and already cashed up from your pro rugby days, you may not be eligible for these discounts if you’re buying a home closer to $1 million (or more). But if are around the $500,000 or sub-$500,000 mark, there’s usually a number of special incentives offered by your state or territory government.
You can miss out on these when buying with a partner. Obviously two people buying a home – especially with a view to having kids down the line – will often seek to maximise the square footage they can get, and this usually comes with a greater cost, seeing you go over the discounts threshold.
This dynamic also applies to saving for a home. While if you save alongside a partner you should be able to build a big deposit faster, it can also be a big adjustment to get two people’s budget synced up and in ‘deposit saving mode’.