Deposit

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First homebuyers need to save consistently for a decade to muster the average $113,000 property deposit, according to the latest calculations by the comparison site, Mozo.com.au.
“First homebuyers are having to face the huge hurdle of bridging the ‘deposit gap’ to buy a property, which could take anywhere between six and 14 years, depending on the city,” said Mozo director, Kirsty Lamont.
Mozo crunched the numbers on the average property price in each capital city to work out just how much and how long was needed to save to build up a 20% deposit.
“Anyone renting in Sydney could buy six years and five months earlier by shacking up with the parents,” said Kirsty Lamont. 
Mozo’s four tips to speed up the savings process:
• Start now, it’s never too early to start saving for your first home. 
• Cut back on high everyday costs like transport or rent, consider moving back home or curb your entertainment and eating out costs.
• Look for a better rate of return on your savings balance. Shop around and take advantage of bonus or intro offers.
• Consider buying a property with a family member if your circumstances allow.
<a href="/images/2015/07/21/mozo_deposit_chart.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/21/mozo_deposit_chart.jpg" alt="">
Deposit amounts are calculated based on the average capital city dwelling price, using CoreLogic RPData Home Value Index, June 2015.
Savings amount is calculated at 15% of the average monthly salary in each state based on ABS Average Weekly Earnings Australia, November 2014. The tax was deducted using the various tax rates outlined by the ATO.
Average Sydney rent of $530 a week based on Domain Group Rental Market Report, June 2015.
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Mozo reckons shacking up with the parents necessary for savvy first time home buyers

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<img src="/images/2015/11/NEW_RAMS_LOGO.jpg" alt="">
Saving for a deposit can be tough but there are ways you could fast-track your entry into the market.
Most lenders will only extend finance up to 95% of the property’s value, so you’ll usually need a deposit of at least 5%. If you want to avoid paying lender’s mortgage insurance, you may need to save at least 20% of the property’s value.
You may also have to budget for extra expenses such as stamp duty, transaction costs, conveyancing fees and removalist costs. 
A disciplined approach to saving, can help you get there but you may be able to get into the market sooner.
ASK YOUR PARENTS OR SIBLINGS - If your parents are willing to help, you could ask them to stand as guarantors for the loan. This often allows you to get a mortgage with a smaller deposit, or no deposit at all. The guarantee can be limited to a certain amount and could be removed after you’ve built sufficient equity in your home. As guarantors, your parents are using their assets to back you so make sure you all fully understand the potential consequences.
BUY WITH A FRIEND OR RELATIVE - This could cut down on the amount you need to save as you’ll both be contributing to the purchase. You’ll each own part of the property and share in the mortgage repayments. Be sure to seek legal advice to avoid potential disputes down the track.
BUILD A DUPLEX – Take buying with someone else to the next level and build together. By building a duplex and then subdividing the land, you each could end up with your own home at potentially a lower cost. There are lots of factors to consider if you’re thinking of taking this approach. Check council zoning and budget building costs carefully. There will be costs including the subdivision, survey expenses, legal and application fees, but you may be eligible for a stamp duty concession.
BUY OFF THE PLAN – Governments are waiving stamp duty on newly built homes to encourage development. Buying off the plan also allows you to buy now and pay later. You’ll have to put down a deposit on the property when you sign to buy but settlement doesn’t occur until after your home is completed, giving you longer to save.
Quick tip: What works for you will depend on your own personal circumstances. Consider seeking financial and legal advice.
 
TO FIND OUT HOW RAMS CAN HELP EASE YOU THROUGH THE PROCESS, GET IN TOUCH WITH YOUR LOCAL RAMS HOME LOAN EXPERT OR DROP IN FOR YOUR <a href="https://ad.doubleclick.net/ddm/clk/297184793;124284611;o" target="_blank">FREE FIRST HOME BUYERS’ GUIDE</a>.
For more great property advice and tips on buying your first home from RAMS subscribe to <a href="https://ad.doubleclick.net/ddm/clk/297184564;124284612;l" target="_blank">The Great Australian Dream property series</a>.
For your free Property Observer eBook from RAMS, 12 tips for first-time buyers, covering everything you need to know when it comes to purchasing property, <a href="component/content/article?id=48727" target="_blank">click here</a>.
Disclaimer: Information in this material is general and does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. You should also obtain independent professional advice relevant to your financial circumstances.
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Buying a first home sooner

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Research from ME shows one in ten Australians are saving to buy a home.
That’s a lot of people working towards the same goal. And it can be done, says Nic Emery, head of deposits and transactional banking at ME. But if you’re struggling to grow a first home deposit, it could be time for a fresh approach. Weaving healthy money habits into your daily routine could be the key to growing a first home deposit sooner.
You see, while old habits die hard, new habits can be formed just as easily. The trick is to anchor new habits to existing habits. 
Use old habits to develop new habits
Research by psychologists confirms that using a non-financial cue like making your regular morning coffee to check the balance of your everyday account, can see the two actions start to go hand in hand. In fact, some people can develop new habits this way in as little as 18 days. It can mean your first home deposit starts to forge ahead in less than three weeks.
Let’s take a closer look at how your current habits can be used to launch some clever new financial habits to get into your first home sooner.
Take the bus to work. Check your budget
Whether you travel by train, tram or bus to work, use your daily commute as a cue to review your budget. 
ME research shows only one in two Gen Y Australians (aged 18-34) – those most likely to be saving for a first home – follow a budget. Yet it is a critical first step that lets you juggle household expenses, pay regular bills on time and still have money for savings.
Grab some lunch. Transfer money into your savings account
Give your savings a boost while refueling your energy levels. Making regular deposits, no matter how small, goes a long way to growing first home savings. 
Be sure to use a dedicated savings account. Over one in ten (14 percent) Gen Ys accumulate savings in an everyday account, and that may mean missing out on valuable interest income.
Head home. Review the days spending  
Only two out of five people keep a written record of their expenses. But this simple step will help you develop a more accurate picture of your spending patterns and highlight areas where you can cutback to free up cash for extra saving.
Tune into your favourite TV show. Check your savings.  
Unwind, relax and use the opportunity to monitor your savings and also your savings account to be sure your money is earning a competitive rate. 
Plenty of savings accounts offer an enticing introductory rate. The trouble is, after just a few months your money could be earning a very low return making it harder to save a first home deposit. 
Skip the hassle of shifting money around from one account to another by choosing a bank that offers a consistently good rate on savings.   
Four daily habits. Four steps to grow your first home deposit. Start today, and with plenty of repetition you can reach your goal sooner. 
 
For more information <a href="https://www.mebank.com.au" target="_blank">click here</a>.
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Property 101: Four daily habits to help save for a home

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Nearly 30 percent of first home buyers had to save for more than five years on order to save a deposit according to Mortgage Choice’s First Home Buyer survey.
Chief executive of Mortgage Choice John Flavell said it came as no surprise to find that 1 in every 3 first home buyers had to save for more than five years before buying their first home when house price growth continues to outpace the growth in incomes.
“Interestingly, while those first home buyers who bought a home within that last two years said it took them more than half a decade to save their property deposit, those who are planning to buy their first home soon believe it will only take them ‘one to two years’ to save their deposit,” he said.
“When it comes to buying property, first home buyers may feel as though two years is a long time to save, but in reality, saving for a property can take quite a while.
"Even if you’re a dedicated saver who diligently puts away a portion of your income into your savings, it’s still very time-consuming to save the amount you need for a deposit.
“And, with house prices consistently rising, the deposit size needed continues to grow.
“Day to day expenses such as groceries, rent, and transport costs, can also impact on a first home buyer’s ability to save.”
Mortgage Choice has five tips to help first home buyers reach their savings goal faster.
1. Have a realistic savings plan
Take control of your finances by drawing up a practical savings plan for the month. Factor in regular expenses such as going out, transport and rent, as well as any bills and debts. Consider what luxuries could be reduced as these will help make a difference to your savings capacity. At the end of the month, have a look at your plan and, if necessary, reassess your spending.    
2.Consider switching lenders
If you have kept your finances with the same lender since your first job, it might be a good idea to have a look around and consider switching to another bank. Today, some lenders are actually offering financial incentives if you switch, which could help you to boost your savings faster.
3.Sell your unused items
You could make some quick money by selling belongings you no longer use or need. Online outlets such as eBay and Gumtree are great places to put your items up for sale and watch the cash come in.
4.Pay off debts
Credit cards and personal loans can easily get out of hand if they are not managed properly. Paying off debts will not only maximise the amount you may be able to borrow when it comes to applying for a mortgage, but it will also help you free up some of your cash flow and allow you to save more money faster.
5.Save 10 percent of your income
Saving a designated amount of your income takes discipline, but it is financially rewarding. It is advisable to set up a savings account where you put in 10 percent of your pay as soon as it comes through. To reduce the temptation to spend it, you may want to open a savings account with a different lender and not get a debit card connected to the account.
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30 percent of first home buyers took more than five years to save a deposit

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Some 800 anxious off-the-plan buyers of apartment in incomplete Ralan Group projects didn’t get heartening news when they attended the creditors meeting in Sydney.
The over whelming majority of buyers had allowed their deposits - that ranged from the standard 10 per cent up to 20 percent - to be released to the developer in return for 15 percent interest rates on the funds during the construction phase.
They have a small hope of getting their deposit back although not any time soon amid the <a href="https://www.urban.com.au/news/102095-william-o-dwyer-s-ralan-hits-voluntary-administration" target="_blank">$500 million company collapse</a>.
The first creditors’ meeting was not attended by William O’Dwyer, the founder of Ralan who had promoted its projects heavily among the Chinese-speaking community.
It emerged a Sydney law firm has taken up the fight on behalf of the apartment buyers. 
Matthew Bransgrove, who heads up Bransgroves Lawyers, a firm specialising in mortgage lending litigation, was now representing Ralan investors who had released their deposits to the developer as unsecured loans.
"We are currently investigating whether it will be possible to recover the funds through legal action against either the secured creditors or the solicitors who acted for the investors," he indicated.
Bransgrove said the 15 percent interest rate being offered suggested "Ralan was operating a Ponzi scheme (in as much as the money raised from investors was being used to pay interest to other investors)."
"In the absence of a prospectus there was no way for the investors to ascertain or judge the risk involved.
"Ralan required but did not hold a AFSL licence to issue debentures.
"In borrowing the deposits from the investors Ralan was issuing debentures."
There are 1200 apartment buyers in Ralan’s Sydney and Gold Coast apartment towers among the 1800 creditors of the collapsed property developer, according to voluntary administrator Grant Thornton.
The failed developer which entered administration in late July owes at least $500 million to its creditors.
Details of the creditors’ identities shows Queensland’s Hutchinson Builders is owed $5.5m.
Grant Thornton said there were five apartment towers affected by the Ralan collapse.
They are The Orchid at Arncliffe, a long-dormant site near Sydney Airport, along with Ruby Tower 2, Ruby Tower 3, Ruby Tower 4 and Sapphire on the Gold Coast.
Grant Thornton said The Orchid, which fronts 213 Princes Highway, Arncliffe, was the only apartment tower under construction and it was in discussions with the relevant stakeholders.
Lawyer James Feng was at the meeting to represent clients who had bought into the Orchid, the incomplete 318-five tower apartment project, in 2014.
He hoped the buyers would be able to keep their purchase alive as there had been considerable price appreciation.
They had hoped it would be settled by early next year.
Said Jahani at Grant Thornton Australia said the administrators would explore whether future buyer or developers would honour the purchaser’s sale contracts but this remained uncertain.
“Purchasers may receive their deposit back if their funds are still held in a separate trust account,” he said.
One Ralan buyer Shirley Han at Roseville had known of Ralan for more than decade. She resides in a Ralan project at Roseville and has another investment at Warawee.
"They sold like hot cakes," she said.
"I don't think it is a con," she said.
"I am suffering but so too are all the workers at Ralan," she added.
Some of those who attended the meeting were the sales team who had worked for Ralan on commission-only sales contracts for years, and had also invested themselves in the off-the-plan apartments taking their apartments in lieu of regular income.
The NSW state government has indicated it was moving to ensure that off the plan apartment deposits won’t be able to be accessed prematurely by property developers.
New legislation would safeguard deposits within the trust funds of solicitors/conveyancers, estate agents or the public trustee.
The legislation passed parliament last November, but the regulations have been ­delayed and not expected until later this year at the earliest.
This article was first published in the Daily Telegraph.
 
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