Why more Australians are buying their first home later

It’s a sad but chilling fact that more and more Australians today are having to delay buying their first home until later in life, according to shocking new data from the Australian Bureau of Statistics (ABS).

The Australian Housing and Urban Research Institute (AHURI) reports that with more Australians acquiring their first mortgage later in life, more and more people will end up having to pay off their mortgage even after retirement arrives. In doing so, this could mean dire consequences, especially if these people have yet to build up enough wealth for their retirement years.

According to analysis by The Association of Superannuation Funds of Australia (ASFA), to lead a modest lifestyle at retirement, singles require an income of around $23,996 per annum, whilst couples require approximately $34,560. However, this is a very frugal lifestyle where you can only afford the basics. To lead a more comfortable lifestyle, ASFA state that singles require $43,372 a year and couples $59,619.

As the current full government age pension only provides singles with $22,804 per year or $34,372 a year for couples, it is even more important that you maximise your investments and wealth as early as possible so you don’t solely rely on the age pension and can enjoy your retirement in comfort. You definitely don’t want to be still paying off your mortgage at this time. Ideally you need to own your home in full by the time you retire.

The latest ABS Survey of Income and Housing 2013-2014 reveals that households buying their first home are much older than they were over a decade ago. Back in 2000-2001, more than 60% of first home buyers were between the ages of 25 and 34 years. By the time 2013-14 arrived, less than half (49.6%) of first home buyers were aged between 25 and 34.

As first home buyers are getting older, unsurprisingly the proportion of households aged over 65 years and still paying off their mortgage has also more than doubled. This has risen from 3.6% of all households aged 65 and over in 2000-01 to 8.2% in 2013-14.

What is causing the first home buyer age to rise?

So, what is causing the first home buyer age to rise? This rise in the number of older first home buyers is down to a number of factors including higher property prices, especially in Sydney and Melbourne where property price growth is outpacing wages growth, the rising cost of living and larger deposits required due to tougher lending restrictions.

It can be quite a scary thought to think that by the time we are able to pay off our mortgage we might be retired, or we are faced with the option of having to work longer to fund this. The retirement age is also set to rise from 65 to 67 and no doubt will rise again over the upcoming years. However, if you don’t fancy paying off your mortgage whilst you’re in retirement, then there are a number of strategies that you can take hold of now to avoid still paying off your mortgage in your late 60s.

5 Key Strategies to get you to property ownership sooner

1. Rentvesting – As it’s becoming much harder to buy a property as an owner occupier, many people especially Gen Y are turning to rentvesting instead. Rentvesting is where you buy an investment property in a high growth area whilst continue to rent in an area you want to live in. This provides lifestyle benefits, plus allows you to get a foothold on the property ladder, allowing you to buy in an area that is much more affordable. Many people in Sydney are now turning to rentvesting to invest in property interstate such as in Brisbane which is much more affordable in comparison to Sydney property prices.

2. Buy off the plan – Buying property off the plan rather than an established property can also get you to property ownership sooner. Firstly, off the plan properties tend to be more affordable, with lower entry prices and you only require a 10 per cent deposit. You can then sit back and continue to save over the next few years whilst your property is under construction, giving you valuable time in the market with the potential to see property prices increase. It also gives you more time to save up a larger deposit or to build up some extra funds for emergency.

3. Buy with friends – Saving up a deposit on your own can be extremely hard; however buying with other people such as friends, family or your partner can make your road to property ownership much easier. Splitting the costs means you each require a smaller deposit.

4. Ask your parents for help – You might be in a position where you can ask your parents for help. They might be able to gift you some money to use towards your deposit or they could go guarantor and use their home as security against the loan. Once you have paid down enough of the equity, you can release your parents from this to lower their risk exposure.

5. Lower your expectations – You need to remember when buying your first property, you are unlikely to live there for the rest of your life. It’s therefore best to start off with something small such as a one bedroom apartment rather than two bedrooms, or look for suburbs that are more affordable. Rather than going for high end finishes, you might have to opt for something a little more standard. However, keep in mind that property ownership is a long-term plan and you should be holding onto a property for a minimum of 10 years to see the greatest benefit. During this time, property prices also tend to double in value.

What next?

The best thing you can do is to take action now! You need to do something today to prepare for tomorrow. Time is constantly ticking and if you don’t start thinking about your retirement, then time’s going to run away from you very quickly.

Today we are living in a completely different society compared to our parents and grandparents. The modern world we live in is all about convenience, lifestyle and comfort. We tend to want nicer things, own the latest gadgets and enjoy expensive holidays. However, in order to purchase property and ensure that we can lead a comfortable retirement we need to make some short-term sacrifices for long term gain.

Although your parents bought a home to live in, this doesn’t mean we should be following their path. Times have changed which means we need to change our attitudes to make the best of the situation in front of us. Instead of buying a home to live in and paying down a mortgage for 20 years, it is possible to invest in property first and become an owner occupier later, allowing you to own multiple property investments and your own home and have the ability to lead a much more comfortable retirement.

To find out more about how you can avoid paying off a mortgage at retirement and ensure you can be mortgage free instead, get in touch with the iBuyNew team today to learn more. Give us a call on 1300 123 463.
Published on 28th of February 2017 by Marty Stanowich
Marty Stanowich
Marty Stanowich


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