Housing Affordability: Time for Potential Buyers, As well As Government, to Re-think Options

Housing affordability is a real and serious concern for many potential home buyers in South Australia but there are opportunities for people prepared to rethink their options, according to First National Real Estate.

“Although housing affordability is at last on the national political agenda solutions that deliver real opportunities for buyers are clearly a long way down the track,” CEO Ray Ellis said. “In the meantime, potential buyers, particularly first home buyers, need to work with the realities of the market and look at what they can do rather than start to believe home ownership is out of reach.”

Mr Ellis said Adelaide’s average house price of around $310,000 was competitive compared to other capitals but remained daunting for many people, and the issue was compounded by lower than usual rental vacancies, particularly in the inner city suburbs. .

“Understandably there is some very real worry and frustration as renters and potential buyers feel increasingly squeezed,” he said. “But they should not be deterred by the affordability debate from looking closely at what opportunities there are in the market.

“Regardless of initiatives by the State and Federal Governments that may be implemented over coming months and years, the fact is the pattern of home ownership in Australia is irrevocably changing. People will need to think more about what they need in terms of housing security rather than what they want.”

First National Real Estate said potential buyers need to consider new strategies and options.

Extend the life of a mortgage. “In recent years all the focus has been on how quickly a family can pay back the mortgage and then move another rung up the ladder,” Mr Ellis said. “Obviously it’s desirable to pay back a mortgage as quickly as possible, but times are changing and it may be more useful to focus instead on how to get into the market in a way that is financially manageable. For younger people in particular there should not be any pressure to be making additional mortgage payments or worrying about the life of a loan.”

Reconsider locations and expectations Too many people remain obsessed with being able to buy close to the CBD, according to First National Real Estate. “Today’s reality is that this is no longer a feasible option for many younger people and families,” Mr Ellis said. “There are very good buys, relative to inner suburbs, in areas that are within commuting distance of the city.” As well, many regional areas across the State have boomed in recent years and now offer much better infrastructure. Improved telecommunications and work practices mean that working in more remote areas is increasingly an opportunity for young families and house prices are significantly lower than the city.

Joint ownership , Family co-ownership is an emerging trend, with parents drawing down on the equity they have in the family home to provide financial support to their children to get a foothold in the market. “For many Australians, the bulk of their wealth is tied up in the family home,” Mr Ellis said. “It can make sense for parents to distribute some of this when their children need it most.” Co-ownership of a first property between friends is another key trend, particularly single people and couples without children. “Provided legal advice is taken and a contract among the parties is in a place, this is an option that can allow some people to get equity in a property that may have been beyond their reach and move them towards getting a home of their own sooner than may have been possible.”

Buy an investment first Young people could consider staying on in the family home and buying a small investment property, Mr Ellis said. Focus on paying down the mortgage for the first few years with the assistance of rental income. Then either move into the property or sell it and use the proceeds for a deposit on the next home.

Mr Ellis said people will need to start thinking outside the traditional parameters around home ownership and getting into the property market.

“The assumption that there’s the perfect and affordable first home in the perfect location for everyone is no longer valid, and neither is the assumption that we can all up-grade our property every few years. Home buyers need to re-assess where the opportunities are and be prepared to make creative compromises,” he said.

However, he said both State and Federal Government has a responsible to move quickly to ensure adequate housing supplies are available in appropriate areas, particularly for the most disadvantaged.