Mo'Money Mo'Money - Where is the money coming from?
Do you have a 10% cash deposit? 90% have, 10% have not.
Apartment Register has received and qualified 238 first home buyer (FHB) enquiries to date in 2015, so where or who pays for the deposit and what is the length of time taken to save for the deposit?
First home buyers understand time is of essence to enter the market and it is a good time to do so. Interest rates are low, apartment supply is reasonable, product choice and quality continues to improve. The timing might be right but the deciding factor is the ability to save or already have at hand 10% cash; that is a $45,000 deposit on a $450,000 off the plan apartment.
The typical Australian income after tax is $43,100 for a single person. Of the first home buyer enquiries who nominate as single, 70% are female aged between 25-35 and 30% male aged between 28 and 40. With an ideal budget price range of between $400,000 to $450,000. 50% of the first home buyers currently reside at their parent’s residence and have deposit assistance from their parents, with the remaining currently renting with their partner or a friend and have saved the deposit without family assistance.
When asked the average time frame to save the current amount the typical response is 5-6 years. Are we living above our means? Our embrace of lifestyle living is a choice and an expensive one at that.
Australian household credit card debt is growing at 5% per annum. Lifestyle is a direct result of location, access to and ease of use of local suburb amenity and facilities. However living the lifestyle comes at a cost, the realty is you are out more, spending more.
Property ownership is both a privilege and a responsibility, and a move that which requires long term planning. Factoring into account the typical 5-6 year timeframe required to save a necessary deposit, prospective first home buyers should consider the ramifications of not entering the market when they possess the means to do so. To enter two, three, six years down the track will most likely result in the FHB's holding comparatively higher product expectations with an associated product cost increase.
The adage of getting you foot in the door rings true in the Melbourne property market.
How do you educate the FHB market on the importance of purchasing property? My Real Estate Mate recently published the process of how to buy an off the plan apartment in response from our clients wanting to understand the intricacies of the off the plan buying process. However, clarifying the process to purchase and actually having the ability to purchase are two very different things.
Property development is the management of time, specifically the cost of time; time effects supply which is the main driver of affordability. The national debate on housing affordability requires more than a knee jerk suggestion of early access to and use of Self Managed Superannuation Funds (SMSF) for FHB’s. The time taken to set up a SMSF, the cost, regulations and audit requirements are prohibitive for many, FHB’s included.
Generation Rent is a term commonly used in Europe, it depicts the economic snap shot of relative level of wages, the cost of living and supply of affordable housing product. Credit card debt will continue to grow, the reliance or presumed inter-generation transfer of wealth will be slower and reduced as we are living longer and the cost of aged care escalates. Generation Rent is on Australia’s door step.
