Housing affordability is a problem for many Australians, and Governments at all levels don’t seem to have any answers. There wasn’t a single recommendation in the 56-page report from the 2016 House of Reps inquiry into housing affordability, so we obviously can’t rely on Government intervention to manage escalating housing costs. But there is good news if you are prepared to be proactive. As long as you have certain fundamental financial habits in place, home ownership is achievable, particularly so if family members can assist you.
For a young person who wants to buy their first home (or a growing family who would like to upsize), the price of housing is probably making this feel like an impossible dream. We understand. But instead of being discouraged by media reports, we suggest you consider three practical and do-able steps that aim to help you achieve your home ownership goals.
We don’t advise you to wait for government policy changes to improve housing affordability because you could end up locked out of the property market in the meantime.
You could struggle to get ahead if you haven’t yet sought advice on a savings strategy that is appropriate, sustainable over time and flexible. Even if you or family members have begun to save for your deposit, you still need advice on strategy. For example, if you only hold cash-based assets, the returns may not be able to match increasing property prices.
We can help by working with you to develop a tailored savings strategy that supports your plans for home ownership. In many cases this may require an inter-generational ‘family based’ approach to solving the issue of housing affordability.
Three practical steps towards home ownership
1. Develop a savings habit
In addition to accumulating a deposit for a home, a savings habit also helps develop the discipline needed to manage loan repayments.
We’ve all known since childhood that savings is a good idea. But it can be hard to get started. Your questions probably include how much you should put aside to make it worthwhile; how much you can actually afford to put aside; and where you will get a reasonable return on your savings.
To answer these questions, you will first need to know how your earnings compare with your spending. If you are spending the same as or more than you earn, it’s impossible to save. We can help you do some basic household cash flow budgeting to bring your spending in line with your income. And if family members are putting money aside on your behalf, we can help them too.
2. Take a long term view
It is important to understand that savings and investment are long-term financial strategies. To make the most of this, any savings habit should start as early as possible.
As your savings grow, you may be well-positioned to fine-tune your strategy with the aim that your savings can work even harder for you. For example, once your savings reach a certain level, you may be able to include an allocation of growth assets rather than just cash. This would give you the potential to benefit from compounding rates of return. In turn, this means you would likely be able to use your investment earnings (not just your savings) towards a deposit for your home.
Taking a long-term view is an integral part of any robust savings strategy.
3. Save as a family
The current housing affordability situation has prompted many families to work together across generations. Parents and grandparents may begin long-term savings in order to build an asset base to assist younger family members to enter the property market. There are also other ways families can conquer the housing affordability issue.
In order to be effective, such a strategy should be implemented in the context of each family member’s overall financial plan to ensure that no-one’s long-term financial needs are compromised.
Your next step
In our experience, home ownership is not out of reach if the prospective homeowner can combine a reasonable deposit and a robust savings habit that are overseen by professional advice.
We are able to assist with cash flow, budgeting and wealth creation, not only for the potential first home owner but also for a family member who wants to help someone enter the property market. The key is to start early and have the discipline to allocate money to savings on a regular basis. From there, you may expect to benefit from the magic that is compound interest …
To find out more about how our cash flow, budgeting and wealth creation services can help you, please contact us by phoning (07) 3808 2808 or emailing email@example.com.
Pacesetter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information (including taxation) is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Pacesetter Financial Services strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.