One of the most controversial commentary pieces of late has been from the Australian, columnist Bernard Salt – linking the reason first home buyers are squeezed out of the property market to eating too many smashed avocados in hipster cafes.
Ok I get it, spending $22 on a bit of toast and some avo spread might seem a bit outrageous, but I have to say, there are a few things that Salt overlooked:
- Even if you ate avo toast once a week at $22 a pop, over 5 years you would have only spent $5,750, which wouldn’t put you very far towards a home deposit in Australia’s major cities.
- Which brings us to – Australian property is expensive. The average house price according to Domain.com.au in Sydney is now $995,804 and in Melbourne slightly less at $707,415.
- Whereas, wage growth is at an 18 year low. Sorry Joe Hockey we are trying as hard as we can to “get a good job that pays good money”.
- Plus to make matters worse, when the Mozo team crunched the numbers, looking at median home prices in each Australian capital city, a first home buyer saving 10% of their income could never afford to buy in Sydney and Melbourne if prices continue to rise as they have been.
So basically saving up a deposit for your first home isn’t easy, and really, there are more factors at play than millennials hanging out in hipster cafes more often than they should.
But that doesn’t mean purchasing property isn’t achievable. To all the first home buyers out there, I say this – you can have your first property and eat your smash avocado too.
Here’s some tried and tested first home savings tricks to get you to that first home sooner and prove those haters wrong:
1. Become a rentvestor.
Did you know there has been a surge in millennials turning to investments rather than homes they’ll actually live in? And it’s easy to see why, with benefits including getting in the property market sooner thanks to lower entry points, gaining a rental income from tenants and also the opportunity to bring down your taxable income by claiming property related expenses if your property is negatively geared.
2. Enlist the help of family.
You’ve probably heard of guarantor loans where your parents put up a portion of their property as security for your loan and you can purchase with a smaller deposit but another trend that is becoming more common, is siblings getting together to purchase property. The obvious bonus is not having to save up the full deposit and of course owning property sooner, without getting your parents involved. If you do decide to co-own, just make sure you’ve agreed on the logistics before you move in. For instance, will the property be rented out or will you both live in it and what will happen if one of you decides to move out?
3. Consider off the plans.
This is the option I selected when I was a first home buyer. The benefit of buying off the plan is most states and territories offer a one off grant if you’re a first home buyer purchasing new and you’ll also usually receive exemption from stamp duty. Plus it will give you more time before settlement to save for all the ongoing expenses of owning property like your home loan repayments and strata fees. Of course, always do your research before going down this route, and know the risks attached to purchasing a property that isn’t built yet, like delays in construction.
Other ways to save up your deposit:
- Get a second job by signing up with websites like Uber and AirTasker
- Sell second hand stuff on GumTree and eBay
- Save at least 10% off your income each paycheck in a dedicated savings account
- Move back home with mum and dad (I definitely understand, this option is not for everyone!)