I often hear people say that it’s too difficult for young people to buy their first home. Reasons given include restrictive lending criteria, high interest rates and high property prices. Now, I don’t necessarily disagree with these comments but as I am a ‘glass half full’ type of person, I try and look on the positive side and for solutions.
By PETER KOULIZOS
Restrictive Lending Criteria
There’s no doubt that straight after the global financial crisis it was very hard to borrow money from lending institutions. Some banks wanted first homebuyers to have at least a 20 per cent deposit and demonstrate genuine savings over a very long period of time. Did you realise that now many banks are willing to accept a five per cent deposit and genuine savings over six months?
I can already hear some of you saying that even six months is hard to save for when you’re paying rent. But did you also realise that some banks are willing to accept your rental history as evidence of savings? That’s correct! If you have been paying rent for at least 12 months, the arrangement is ‘at arm’s length’ and you have an unblemished history of paying on time, some banks will accept this as evidence that you have the discipline to save. You still have to find the 5 per cent deposit but this can come from the First Home Owner Grant and possibly gifts.
High Interest Rates
You think interest rates are high now? Our first home loan was at 13.5 per cent. Some of our friends who bought property just after us were paying more than this. Commercial loans were available at interest rates of just over 20 per cent! The current interest rate may seem high to those who have never borrowed for a home before, but taken into perspective, the current discount variable rate is at about a level equivalent to the 25-year average.
High Property Prices
It’s pretty hard to argue that property prices aren’t relatively high, in relation to a number of indicators, so I won’t bother wasting the ink. For those of us who have owned property for a while, we like the fact that our properties have increased in value markedly over the last ten years. Property prices may drop this year, but the fall will be miniscule. Don’t wait to get into to the market after property prices plummet because they won’t. If the price of the property you want to buy is too high, find another property. The alternative property will need to be further from the CBD, further from the beach, smaller and/or require maintenance.
Can home ownership still be achieved? The answer is YES! Take note of the tips below and you’ll be amazed how quickly you’ll be into your first home. I
f you’re renting, move back home and save the rent and use it for a deposit.
Look for a unit in an up and coming area rather than a house in an expensive area.
Don’t be scared to roll up your sleeves and do some work to fix up the property.
Buy the new car or go on the overseas holiday AFTER you’ve s aved the deposit for
SAVE AT LEAST 25 PER CENT OF YOUR INCOME until you have a sizeable deposit. Happy House Hunting
Peter Koulizos is a property educator at UniSA and TAFE and the author of The Property Professor’s Top Australian Suburbs – a guide to Australia’s top suburbs for property investors and homebuyers, available from www.businessmall.com.au