It is no secret that buying a property in Sydney has become very difficult for first-home buyers.
According to Australian Bureau of Statistics housing finance data, first-home buyers made up only 13.8% of the owner-occupier home loans.
A report by BankWest has estimated that in Sydney, a first-time buyer couple would need to save for an average 8.4 years for a 20% deposit of $214,600 to buy a median priced house.
The statistics are undoubtedly grim and can be quite discouraging for anyone trying to get onto the property ladder.
However, if home ownership is still a goal for you, there are three strategies you can consider to make this a reality.
1. Get a family member to go guarantor
These days, a growing number of first-home buyers are turning to family members, usually parents, to go guarantor on their loan. Under this arrangement, a guarantor uses the equity on his or her property as additional security for an applicant’s mortgage.
If you have not saved enough for a deposit, a guarantor is a good option as you may be able to borrow the full purchase price and avoid costs such as Lenders Mortgage Insurance. The risk is that if a borrower defaults on the loan, the lender will require the guarantor to make the repayments
2. Buy where and what you can afford, then progressively upgrade
Depending on your budget, you may have to compromise on your dream home by buying in a different area and/or a smaller property that you can afford. It may mean not owning a free-standing house with a backyard and buying an apartment instead, or buying further away from the CBD.
Consider this method as a stepping stone to your dream home. After you spend some time building enough equity in your property, or saving up for another deposit, you can upgrade into a better home.
3. Consider rent-vesting
This is closely linked to buying where and what you can afford, but instead of living in the property, you lease it out and rent elsewhere. Rent-vesting, as this strategy is called, lets you get onto the property ladder sooner with a smaller deposit, instead of waiting until you have saved enough for your ideal home.
At the same time, you can rent a home in a location that you want to live in. A benefit of rent-vesting is the ability to save a deposit through the rental income from your investment property.
Buying your first home can be challenging and there are pros and cons to each of the strategies discussed above.
You should never rush into things and you should always seek expert opinion to see what options are the best for your situation.