Pictured: Australia. Not pictured: the many challenges involved in buying a home here.
Buying your first home in Australia is way harder than it used to be. Certainly first home buyers in cities like Sydney and Melbourne know this. It’s also something Aussie first home buyers in Brisbane, the Gold Coast, Perth, and a ton of other Australian communities experience too.
Buying your first home has never been an easy process, but today it can be really intimidating. It’s a goal worth chasing, but it’s a hard one to plan for. Lots of steps, lots of money, and lots of planning involved.
I understand this, that’s why I’m writing this here now. To give you a 101 on the key steps you’ll encounter as you go down this road.
To kick off, it’s important to understand the lay of the land, and what’s changed between now and when your parents brought a home.
Once upon a time buying a home in Australia looked pretty simple. You’d finish your time in education, then work for a few years in a 9 to 5 job to save a deposit. You’d then be ready to buy a home, especially if along the way you’ve met a special someone you want to settle down with. Today the landscape is totally different, and it can seem like it’s a perfect storm.
Many young Aussies today spend longer in education than generations prior. Not only will an undergrad degree be done, but also something in postgrad too. This is good stuff on paper, as it means we’re a nation of smart cookies getting smarter! But uni students often feel the need to study longer because without more education they’ll feel it’s way harder to get their first job.
This delays starting full time work, and they build up big debt meantime. All this in a world where it’s a reality that 9 to 5 full time jobs are disappearing, and being replaced by a mix of part-time roles, contract work, and a career in the gig economy. Wage stagnation is also a huge issue in Australia, as in the post-GFC era a rise in the pay packet hasn’t kept up with other economic growth.
Even for Aussies who have sidestepped big uni debt and found a job with good pay, there’s still challenges here. A tradie is unlikely to have saved much cash early on working apprentice wages.
If you run your own business that’s great, but income can be touch and go. It can make it harder for a bank to assess your borrowing capacity if your income often fluctuates up and down.
Then there’s the ongoing cost of rent that stings the hip pocket of so many Aussies, and makes it harder to store away cash to save for a first home.
What this all boils down to it is much more difficult for an everyday Aussie to feel confident about saving for their first home. Whatever their background, and whatever their financial circumstances. It might even feel a bit hopeless.
But what I want to walk you through bow is a step by step process for saving for your first home. It won’t gloss over anything, because yes it’s a pretty tough thing to save. But I want to underscore here that it is possible to save for a first home, and chase the Australian dream. That’s why I’m writing a blueprint, to give some hope for time ahead.
OK, let’s get into the nuts and bolts of it!
Make a Plan
Every great goal in life must begin with a plan. Clearing the hurdle of housing affordability and buying a home will require you to save for a deposit. If you have been born and raised in a small town and are set to stay, this may not be a huge trial for you, as housing may be affordable.
But if you’re like two thirds of Australians who live in a capital city – or many other Aussies who live in a big regional city like Bendigo, Cairns, or Newcastle – you’ll be dealing with some sizeable property prices.
Recent stats show it takes around 5 years for Aussies to save for a deposit of a house in a capital city, with Hobart being a leader at 3.8, while Sydney’s a lagger at a whopping 8.2! It takes a little less time with apartments, but it’s still a matter of many years.
Wherever you are, and whatever your home owning dreams, you must make a plan to get there. The precise circumstances of this plan will be unique to you. Yet almost all Aussies who start saving for a home begin to make some major changes in their lives. When done well, these changes can really help you find another gear, and make progress on your dreams faster.
There’s a couple of common examples here. If you are finishing uni and the job market would allow you to snag a full time job in the final year, consider going part time to finish our your course. It may take a semester or two more, but full time wages will beat a weekend gig, and the sooner you build savings and an employment history, the sooner you can seek a home loan.
If you’re already have a job and want to make a home buy a real priority, consider career options.
If you have a job you love but doesn’t pay enough to meet your savings target, consider what changes are possible. Consider:
Is a part-time gig doable?
Can you start a business after hours?
Could a short course or new qualification get you to the next level on the payscale?
These changes likely won’t deliver you a whole home deposit alone. But little steps really add up. Big steps may also be necessary.
If you love your job but there’s another on offer that will deliver way more money, it’s worth considering. Money isn’t everything – sorry if you’re seeking a blogger than promises it is as he blogs from the backseat of his Ferrari – but it is central to getting a first home. Managing your financial life effectively applies not only to your earnings, but also your spending.
Crunch Your Debt and Spending
Any first home plan must necessarily look at existing spending. Buying a home is a big investment, requiring savings and ongoing payments. Also a ton of potential new expenses like stamp duty, lender’s mortgage industry, and council rates. If you are renting or still living with your parents, you won’t usually encounter these. You will if you buy a home, that’s why cutting excess spending is a must.
Now I’m not going to suggest you to skip out on the smashed avo if you really love it. I’ll tell ya now, anybody who thinks the only reason a young Aussie can’t afford to buy a $1 million dollar home is because they like avo on toast is a real pumpkin. Like a reverse-Cinderella, it’s my hope these people turn into real human beings when the clock strikes midnight.
Pictured: some select financial commentators.
But what I will tell you is any big investment goal ultimately should come with some sacrifice. You are surely aware of this, and ready to make those sacrifices. What I’m saying to you here if you’ve done the sums and end up not needing to boost up your savings plan? Do it anyway!
Nobody is saying you need to live on wheat and water for the next year, but the property process has a way of bringing up unexpected fees. Even at the start, with things like conveyancing, a builder’s report, and other expenses costing a pretty penny. Even petrol as you spend your weekends driving from house to house considering your options.
If you can store a little extra away do it to exceed your goals. Then if you buy your first home and find you have a chunk of change left over? You can treat yourself to a holiday. Meantime save as much as you can to give yourself peace of mind, and also a change to speed up your goals.
Special Savings and Discounts
As well as looking to build your income and trying to reduce your spending, there’s a number of other steps you can take to make you a homeowner sooner.
First home savers accounts no longer exist having been recently abolished. In its place the Australian government has created the first home saver supers scheme. This program allows aspiring first home buyers to save cash for a home inside their current super fund. By doing so the money saved gets a more favourable tax treatment (read: pays less tax) so saving is easier.
This is an option, but as with any financial instrument should be considered with professional advice. It’s also just one of many options on the table. Whatever path you go down to save for a home, it’s essential to keep this in mind.
The Australian finance industry has had well-documented troubles in recent times, and I’ve no problem making mention of it, or talking about it when I’m asked. This is because my team and I are Hero Broker are intent to not only make it easier for Aussies to get a home loan by being their own broker, but also to grow dialogue about how we can make Aus finance more transparent for all.
So it never hurts to get a second (or third!) opinion on any home savings plan you’ve in mind. If you have the right plan and you’ve gotten good advice before, it should be a match. But if you’ve encountered a bad egg in the first encounter, the second opinion could be a life saver. At the very least, it’ll give you confidence in your savings plan as you’ve gotten advice from many sources.
Beyond a home savings account, there’s also a number of state government incentives around. Many states across Australia offer a first home owners grant. In some places this can get you up to $20,000 towards the sum of your new home. Then there’s stamp duty concessions too.
Normally stamp duty can add a big blow on top of the home price, costing tens of thousands of dollars. Depending on your home’s price, you may not need to pay it all. Or if you do, you’ll only have to pay a reduced amount. Offer this is a couple of thousand instead of tens of thousands.
Be Sure of the Timing
If you find circumstances in life are really difficult for you now then it’s worthwhile to consider a delay. If overloading uni subjects would spoil your final year, or if changing today from a job you love for a little more money would stomp all over your good vibes, then revisit it later.
Saving for a home deposit can be stressful. Some of that just comes with the territory and you kind’ve just need to shoulder. Yet if it’s going to be a massive burden to focus on it right here and right now, it’s OK to wait a while. There will still be homes for sale when you’re ready to buy.
The trade-off to this is the reality that home prices are generally going to keep growing. Sure they may dip a little bit, but anyone planning to grab a Bondi Beach apartment for $100 is unrealistic. That’s why getting into the market sooner rather than later is wise. Remember you can also start small, setting aside an amount each month, and then go and ramp it up later when time is right.
Now to Get Cracking!
The dream is one step.
The journey can be long. Bugger, it can 8 years in Sydney!
But that’s why its so important to start today if you’re dream is to own a home in Australia.
Just as I hope this guide was a handy blueprint for you, know that my team and I are always at the ready to hear from you. If you have any questions about what is in this guide, or just want some help getting started with Hero Broker, get in contact with us on (02) 9133 4008 or email.
Mr Piggy, it may be a big journey but buying a home is doable. We’ll also get you a copy of Babe.