Let’s face it: it’s never been easy to buy your first property.
In fact, over the decades there have been a variety of first homebuyer-type of incentives and financial assistance packages available for first-time property buyers.
But, even with historically low interest rates, the strong property price growth in the Sydney property market means that many first homebuyers are struggling to save a big enough deposit to get their foot in the door.
Their cause is probably not helped by tighter lending criteria as banks become more choosey about who they will lend to, and how much they’re prepared to lend at all.
What has happened is that more and more first homebuyers are being forced to rely on their parents to lend them a hand to get a foothold in Sydney’s hot property market.
With a median house price continuing to be above $1 million, it certainly seems like that the “Australian Dream” of owning a home is becoming increasingly unattainable for would-be Sydney homeowners.
In fact, research by Rate City has revealed that one in seven Generation Ys needs three incomes to afford the repayments on their mortgage.
About one in 20 first homebuyers receive money from a parent or grandparent to help them get on to the property ladder, with the average gifted amount about $13,500.
The gift might not seem like much, but when you’re struggling to save a deposit, every little bit helps.
Their saving efforts are also not helped by the reduction of the first homebuyers grant from $15,000 to $10,000 in January this year as well as its restriction to only new property, which the vast majority of first homebuyers had previously steered away from due to affordability considerations.
The Bank of Mum and Dad has become a vital cog in the first homebuyer wheel, which in turn ensures that the property market keeps turning with new buyers coming into the marketplace to buy from would-be upgraders (who themselves were probably first homebuyers not that long ago).
Things have certainly changed since baby boomers first got into the market.
Back in the 1970s, the median house price was just $17,750, and most baby boomers managed to pay off their mortgages on just one income.
Today, Generation X needs two incomes to pay off their homes – although it is the addition of one income to a household which is partly behind the sharp increase in property prices since the 1980s and 1990s.
One of the keys to successful property investment remains time in the market, so the sooner that investors can buy, the more potential capital growth they will benefit from during their lifetimes.
If first homebuyers consider the long-term advantages of real estate investment, then it is a wise decision to speak to mum and dad if they’re ready to start their property journey.
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