The great Australian dream of owning your own home may seem to many as nothing more than a dream as housing affordability continues to be a concern for many Australians.
Most Australians like to live in close proximity to where the action is, making city centre properties highly desirable. It’s more than evident that property prices across most capital cities are on the rise; making purchasing a property in the proximity of these capital city areas increasingly challenging for buyers, particularly for first homeowners.
The Australian housing market has soared 17.6 per cent over the first nine months of 2021, with the nation’s annual growth accelerating at rates not seen since June 1989. New statistics from CoreLogic revealed the national home value index rose by another 1.5 per cent in September alone, putting Sydney comfortably inside the world’s top three list of most unaffordable cities for real estate.
Sydney’s median house price has jumped almost $300,000 over the past year to surpass $1.3 million for the first time. Saving for a house deposit could take, on average, almost 20 years in some Australian suburbs, including Sydney and Melbourne, says new research by comparison site Finder.
Unsurprisingly, Sydney was the most expensive, with residents needing to spend just over eight years on average to save for a home deposit. Melbourne came in second, with the average time to save a deposit taking seven years and four months. With the current increases in housing value it means that it will take an additional 1.6 years to save for that deposit.
So, right about now you may be asking yourself what are the options available to you if you find yourself in this predicament?
Other than the traditional means of saving you may want to consider the following options.
Location
We have all heard the saying location, location, location! Where you purchase a property has a big impact on how much you pay for it. So the first option is to explore other locations. Find areas that fit your budget.
Did you know that Sydney and Melbourne had the highest number of residents that migrated to another city, where Brisbane had the highest number of arrivals. Considering that Brisbane’s median price is half the cost of Sydney, it makes sense that people are moving away from Sydney and Melbourne.
LMI
Lenders Mortgage Insurance (LMI) is another option that will allow you to get into the property market sooner.
Lenders’ Mortgage Insurance, or LMI, is insurance that protects the lender, not you. It’s usually a one-off payment made by the borrower at the time of loan settlement.
Here are the facts about LMI:
LMI is a type of insurance you can expect to pay if you borrow more than 80% of your home’s value.
LMI protects the lender – not the borrower.
You don’t need to arrange LMI yourself – your lender will sort it for you.
Rentvesting
Rentvesting is the practice of living in a rental property while simultaneously renting out an investment property that you own. Rentvesters typically rent property they want to live in (but can’t afford to buy) and buy property they can afford (but don’t want to live in) and rent it out as an investment property.
Rentvesting is a great way to get in the property market sooner rather than later. It allows you to purchase a property that will grow and create equity that will allow you to leverage that equity and buy that dream house or even build a property portfolio that creates an income stream.
For more information read the following blog post on How to leverage equity to build an investment property portfolio.
It makes sense that one would consider investing in a market that they can afford to get in while renting. With the rate of growth that property is recording in many cases it exceeds what we can earn in your normal 9-5. It definitely beats the traditional method of saving for the deposit and will allow you to get in the property market sooner rather than later.
At RPA, we have been helping everyday Australians with property investing for over 21 years.
Contact us and learn how we can help you get into the property market sooner rather than later by booking a Strategy Session.
A Strategy Session with RPA is your first simple step to starting your property journey.
More than a consultation, your first meeting with an RPA property expert is about discovering how we can meet your goals that suit your individual needs.
During the Strategy Session, we can illustrate several general examples of how property investment works and the benefits of working alongside RPA.
When you are ready to take the first step, RPA will facilitate meetings with fully qualified financial brokers, planners and accountants to make the entire process seamless.
Contact us today.