Home owning for Millennials is a greener pasture than avocados

Wednesday 26 Sep 2018

Stereotypes would have us believe that the generation affectionately known as ‘The Millennials’, value smashed avocados on toast, city living and the tech lifestyle above most other things in our collective ‘instant gratification’ led world. But things are not always as they seem with those born after 1980, still craving security and financial stability as much as the generations before them. David Forrest, Chairman, First National Real Estate and Director, First National Real Estate Cairns Central https://fncairnscentral.com/ talks about the truth behind the stereotype. ‘’According to ING’s Millennial Homeownership Report released in May this year, figures show that that 64% of Millennials prefer to plan, with 38% actively saving for a house deposit. It’s not that they don’t want to buy, it’s how they are going about it that has changed. The past decade has been economically challenging with the path to home ownership being unpredictable and therefore, something which has been parked by many. No longer is there the same compulsion to move out of the family home and set up your own place as soon as possible. Domain data released earlier this year showed it takes Australian first-home buyers an average of 6.7 years to save up a 20 percent deposit for a median priced home. Whilst Cairns has a lower median price ($450k in North Cairns according to a recent report by ‘Your Investment Property Magazine’), it would still take approximately four years of frugal living and dedicated saving, to reach their goal. The financially savvy choice is often to delay the move and save for a deposit over a longer period of time. Conversely, there is a trend at the opposite end of the scale where Millennials are buying purely for investment purposes and not actually living in their properties, choosing instead to stay at home or house share with friends’’ said Mr Forrest. With the average deposit for a home in Cairns being in the region of $90k, buying near to the city and being close to work and nightlife, is achievable with commitment however, you will have more space by moving to the suburbs, a trend which is becoming more evident. According to First National’s in-house mortgage broker, Nick Barr, it’s very rare for millennials to have saved a 20 percent deposit. Most of them come to Nick with a deposit between 5 and 10 percent of the purchase price. On a $450,000 house, this is $22,500 to $45,000 in savings. A lot of millennials also now take advantage of family guarantee type loans. These are loans where parents ‘lend equity’ from their home, to enable the millennial to purchase without having a deposit saved. The ‘deposit’ is really the guarantee portion secured by the parents. The delay in homebuying has also coincided with Millennials choosing to start a family much later in life compared to Baby Boomers, so it makes sense that the appeal of suburbia is not only more cost effective, but more practical if children come along. Either way, saving can be hard. David has put together some essential steps to make the journey less stressful. 1.Budget Always know how much money you have coming in, and how much you have going out. Whilst this is widely regarded as common sense, how many of us do it, is another matter. By ensuring you properly document your income and expenditure, review your bills regularly and are being completely honest with yourself about where you are spending your money, you will naturally make considered purchasing choices rather than snap decisions. You will also be able to spot other opportunities to make savings. Is there a cheaper gym you can join? Are there discounts for locals or on group bookings for social events? Work out which things in your life are essential, and which are ‘nice to have’. 2.Sort out your debts It is all too easy to overspend and perhaps push the credit cards beyond sensible limits or put off paying back loans from your student days however, being debt free before taking on a mortgage, is essential. According to the Australian Bureau of Statistics, 24 percent of adults in the 2016 Census have completed a bachelor’s degree or higher, compared to 18 percent a decade ago. This means more people have HECS-HELP loans to repay. Owning a home comes with a range of other stress factors, so don’t enter into it if you are still in the red. 3.Shop around for a good savings account Take your time to find a good high interest account and make it harder to access your funds than your regular account. Make your money work smarter for you and at the same time, think about ways you can stop the temptation to dip into it. One option is to not have a key card for example. 4.Sell, sell, sell! Whilst trying to save a deposit for your first home, you can also take advantage of the situation and kill two birds with one stone. Most of us have items we no longer need, so why not sell them? Not only can this extra money be added to your deposit, you will have less to move when the time comes. 5.Stay focussed Owning your first home is a major milestone in anyone’s life, so when times get tough, remind yourself that the sacrifices you are making today, will pay dividends in the future. An investment in a house will hopefully lead not only to long-term financial security but it will be where you spend a lot of time, so it’s a big step. The Queensland First Home Buyers’ initiative can add $15-20k towards your new home so make sure you factor this into your savings plan. Whilst Millennials are generally more of a ‘live for today’ group compared to previous generations, they also believe in planning for tomorrow and if the latest first home buying trends are anything to go by, it looks like tomorrow has arrived. For all your rental and home buying needs, contact us https://fncairnscentral.com/