Australia's property prices are soaring despite predictions that the virus would cause the market to plummet. Recent data from CoreLogic shows that Australian home values surged 2.1% higher in February; the largest month-on-month change in CoreLogic’s national home value index since August 2003. Spurred on by a combination of record low mortgage rates, improving economic conditions, government incentives and low advertised supply levels, Australia's housing market is in the midst of a broad-based boom, according to Tim Lawless from CoreLogic. Housing values are rising across each of the capital cities as well as across the rest of state regions, demonstrating the diverse nature of this housing upswing.
With property prices so far out of reach, how are those wanting to enter the market going to do so? While purchasing in your ideal suburb may not be feasible at the moment, there are alternative approaches to becoming a home-owner.
Before we get into a couple of alternative strategies, you need to remember that your ideal home doesn't necessarily have to be the only property you purchase. Home buyers, particularly young professionals, readily admit that they can’t afford to buy a house in their ideal location yet. As you wait to save for a deposit to purchase in your ideal location, prices continue to rise and there is a big-risk of being priced out of the market.
Buying off-the-plan
Buying off-the-plan allows you to take advantage of government grants and incentives, and also purchase property with a minimal deposit (5% - 10%) and provides time to save (6-18 months i.e. construction period). Oftentimes, this can act as a motivating factor to save faster and smarter. At PGA Advisory, we have witnessed clients reap the benefit of buying off-the-plan for years on end, and we know that when you purchase in a great location, you are one big leap closer to owning your dream home.
Rentvesting
This strategy allows first home buyers to enjoy the generous tax concessions available to other property investors in Australia. As a 'rentvestor' you can live as a tenant in a rented property, whilst being a landlord of a property that you own and rent out. A growing number of young Australian’s have decided to take up this option as they understand how hard it is to outbid an investor who is aided by tax concessions that first home buyer owner-occupiers are not eligible for. This strategy might allow you to buy sooner, as you may be able to afford a property in a cheaper area without having to compromise on where you want to live for employment and lifestyle purposes.
The reality of entering the property market in Australia's capital cities is becoming more and more out of reach, but luckily there are alternative options out there for getting your foot in the door. While your first real estate purchase may not be your dream home, with accurate and considered planning, you will be able to own your dream home in the future. As we always say, the biggest mistake you can make is not having a plan - so get planning!
If you know someone who you think would benefit from reading this article, please forward it on to them. We are always here to discuss any questions you may have, and of course, to help you plan out your way to owning your dream home one step at a time.
