11 Crucial steps to buy a property as a Gen Y
Buying a property in Australia today is much harder than it used to be, especially if you are Gen Y. Typically born between 1977 and 1994, Gen Y tend to be technologically savvy, sophisticated and style conscious with a reliance on their credit card. They like to treat themselves, whether it be dining out, going on holiday or splashing out on the latest gadgets.
However, their spending habits isn’t the main reason why Gen Y is finding it increasingly difficult to afford to buy a property. Today, properties are generally unaffordable for the majority of young buyers, particularly Sydney residents where the median dwelling price is now at $805,000, compared to $605,000 in Melbourne and $480,000 in Brisbane. And with salaries not increasing at the same rate, the gap between the median property value and earnings is widening.
However, if you want to ensure your future is financially secure then you need to act now and purchase a property sooner rather than later. The earlier you act, the better chance you have of becoming financially secure come retirement. With the Gen Y population now in their 20s to 40s, time’s ticking especially for those closer to retirement and buying a property in the next year or two is imperative if you don’t want to be relying on your pension, which let’s face it, might not even exist by the time we retire.
Buying a property although hard, is actually easier than you might think, as long as you have the right attitude. To help you own a property sooner, here are 11 crucial steps to enter the property market as a Gen Y (or any other generation!).
11 Crucial steps to buy property as a Gen Y
1. Make a solid plan The first thing you really need to do is make a solid plan. What is it you want to achieve and by when do you want to achieve this? Think of the larger picture. You might want to own your own home, but you might also want to retire in comfort, but in order to do so you need a large amount of funds. Building a property portfolio can help you achieve this. If you don’t have a plan in place, then it is very unlikely that you will ever achieve it.
2. Have a savings goal and keep to it Whilst you make a plan, you also need to have a savings goal. Find out how much money you have already saved and how long it will take you to save a 10 per cent deposit. It’s important to be realistic to ensure that this savings goal is possible, as too high a number can dampen your spirits and make you give up. Cut out any unnecessary expenditure such as too many nights out or too many bought lunches, whilst if you have any bad debt such as car loans or credit cards, you need to get rid of this as soon as possible.
3. Automate your savings If you are finding it difficult to save money each month, then one really easy thing you can do is to automate your savings each week or month depending when you get paid. As soon as you get paid, you should automate a certain amount to be transferred straight to your savings account without you having to think about it. You can then spend whatever is left over until your next pay check arrives. As Warren Buffett says, “Do not save what is left after spending, but spend what is left after saving.”
4. Increase your earnings If you are short on money then you could always ask your employer for a pay review to increase your earnings if you have been in the role for a good length of time or feel you deserve a promotion. Failing that, you could always look at finding a new job or getting some extra work. Any additional earnings you receive should be put towards your property deposit to help you get there sooner.
5. Educate yourself in the property market One of the best things you can do is to educate yourself in the property market and learn everything you can about buying property. There is plenty of material online, although you should read between the lines as a lot of news articles are hype. You can familiarise yourself with property related jargon, the property cycle, new infrastructure developments as well as rental statistics, population forecasts and sales history which all has a part to play in choosing the best suburb and property. Speaking to a Property Consultant like iBuyNew can also assist you further.
6. Ask your parents for help Another way to buy a property sooner as a Gen Y is to ask your parents for help. Perhaps they can gift you some money or use their home as security for your deposit. You could always think about moving back home for a while to save money in rent and put this rent money straight into your savings. For example, if you currently pay $1,000 a month in rent then that’s a $12,000 saving in a year.
7. Lower your expectations Struggling to meet your savings goal target? It might be time to be realistic and lower your expectations. Instead of buying that brand new property with the highest quality finishes and marble benchtops, you might be better off going for a property with standard inclusions, but still has a good quality finish. Just remember this is your first property, which you are unlikely to live in for the rest of your life, so you should think of this purchase as a stepping stone to get you to your end goal.
8. Buy with someone else If you are a Gen Y trying to buy a property on your own, then you might want to think about teaming up and buying with someone else such as your partner, friends or a family member. This will cut the costs in half allowing you to focus on saving a 5 per cent deposit which will be far more achievable. However, keep in mind who you buy with to ensure you are both on the same wavelength. You might want to write this all in the contract and determine what happens in scenarios to avoid bad confrontation later down the track.
9. Take advantage of government grants and concessions If this is your first home you are buying property then you could be eligible for the First Home Buyer Grant as well as stamp duty concessions. This depends on where you buy your property and the property value as every state is different. It’s therefore best to check on the government website first to see if you are eligible as the potential to save could be in the tens of thousands of dollars.
10. Invest first Buying a property to live in doesn’t have to be done first. The state you live in such as NSW might be home to the most expensive property prices in the country, making it even harder to enter the property market as a first home buyer. You therefore could invest in property interstate first, allowing you to buy in a more affordable area and make the most of investor benefits such as saving tax, depreciation and more. Many Gen Y’s become rentvestors, that is where they continue to rent where they want and invest in property in a high growth suburb.
11. Buy off the plan A great way for Gen Y and any other buyer to enter the property market is to buy property off the plan. Off the plan properties have a lower entry price making it more affordable to get onto the property ladder, plus buyers have more choice. Longer settlement times mean you have more time to save up a larger deposit if required, plus this extra time in the market means your property could increase in value without you having to start paying a mortgage.
Secure your financial future today by taking action and following these above 11 crucial steps to get to property ownership sooner. The sooner you start, the faster you will get there, as long as you stick to your goals.
Get in touch Find out how you can get to property ownership faster as a Gen Y by getting in touch with the iBuyNew team today. Simply call us on 1300 123 463.
Published on 26th of April 2017 by Marty Stanowich