Millennials ready to sacrifice to save for a first home deposit
Painting young Aussies as smashed-avo-eating, instagram-obsessed kids with an entitlement complex may have been a bit too harsh, ING’s new Millennial Homeownership Report has revealed.
According to ING, more than a third of millennials are saving to buy a house in the next three years and far from the image of entitled youth that may spring to mind when you hear the word “millennial,” the research shows young Aussie homebuyers are aware of the sacrifices that need to be made in order to save up a home deposit.
“Millennials are often unfairly pictured as only living in the here and now, but they want what generations before them wanted; the security and financial stability that owning a home offers,” said ING Australia’s Head of Retail Banking, Melanie Evans.
Almost half of those surveyed thought home ownership was achievable, but accepted that it would take some necessary sacrifices - what’s more, 73% feel happy or content with making the sacrifices when the goal is to own their own home. Here’s what they’re willing to give up:
- Little luxuries, like eating out - 57%
- Big splurges like travel and holidays - 33%
- Major life events, like a wedding, honeymoon or having children - 10%
Not only are they willing to make these sacrifices, but millennials are also realistic about having to compromise on things like the daily commute or location. In order to afford their own home, millennials are willing to:
- Buy in a spot that increases their daily commute time - 60%
- Increase their commute by up to an hour - 57%
- Invest in new, unestablished areas instead of trendy hotspots - 61%
“Millennials are thinking about their future and understand owning a first home might mean purchasing in an unestablished area, taking a longer commute and looking out for fundamentals rather than ‘cool’ areas,” said Evans.
But she added that, “it’s evident that they need help on how to go about saving for a deposit with many unaware of how much they need to save.”
So what’s stopping first home buyers entering the market?
So if millennials are aware of the security of home ownership, keen to embrace the traditional dream of a 3 bedroom house and ready to make sacrifices to get there, what’s holding them back?
“The challenge is not in wanting a home, but how they go about getting it,” said Evans.
A big part of the problem is that millennials don’t have an effective savings plan in place to help them work towards their house deposit. Just 37% had some kind of plan in place, and of those, only 57% had a concrete savings strategy with a specific monthly or weekly savings goal.
Part of the confusion around setting a savings plan might come from the fact that 61% Aussie millennials aren’t sure how much they need to save for a deposit - including 40% who are already saving.
Amongst those who think they do know how much they’ll need to save, $76,000 is pegged as the average deposit amount - but that falls far short of the $135,000 that ING said is the actual average home deposit figure.If you’re thinking of buying your first home soon, there are a few things you can do to help get your saving on the right track:
- Crunch the numbers on how much you can borrow. One thing first home buyers struggle with is knowing how much a bank will lend to them. While each bank is a little different, by working out how much you can comfortably borrow on your salary, with your expenses, you’ll have a good idea of the kind of budget you have when house shopping. This can be a pretty complex thing to work out, but we’ve got a nifty borrowing calculator to do it for you.
- Work out how much you should save for a deposit. Next thing, you’ll need to work out how much you have to save for a deposit. Ideally, you should be aiming for at least a 20% deposit - that way, you won’t need to pay for Lender’s Mortgage Insurance. Check out our guide on how much you should save for your first home deposit to get started.
- Jump start your savings. Once you’ve worked out how much money you need stashed away before starting on your property journey, make sure you find the right place to put it. One option is to explore the First Home Super Saver Scheme and see if that suits you. Otherwise, take a look at some high interest savings accounts to maximise the return on your funds.
- Find the right mortgage. Finally, it’s never too soon to start comparing mortgage deals and running the numbers on which one will save you the most dollars. So head over to our home loan comparison table and get started on your shortlist.