It’s not easy getting your first home these days unless you’re among the really well-heeled. Here’s some tips on buying your first home.
It’s not easy getting your first home these days unless you’re among the really well-heeled. So here’s some help you can get and what’s been proposed.
First home buyers can do it tough, particularly if real estate prices are on the rise as well as interest rates. The two key problems are saving for a deposit while renting and then being able to service a mortgage and still have a life.
Rising rents in many cities make it all the harder for first home buyers to get their deposit together. And rising interest rates do cause homeowners to be stretched in meeting increased repayments and have lost their homes in mortgagee sales.
There is some help for new buyers, but clearly it’s not enough for many of the younger generation to embrace the great Aussie dream of home ownership.
A new report by Gemworth Financial found that 51 percent of non-property owners want to enter the market. Only 16 percent of them believe they will be able to afford to buy a home. Governments are looking at ways of make housing affordability more viable with First Home Owners Grants. The government already provides a $14000* First Home Owner Grant to everyone who qualifies. But a basic problem with grants is that they tend to inflate property prices, so do not help as much as they are meant to.
The grant is administered by each state and territory government, most of which also give first-time buyers some tax breaks.
The Housing Industry Association has given Labor’s superannuation savings plan and higher home loan grant a tick of approval, saying it borrows heavily from a proposal it made previously. HIA’s managing director, Ron Silberberg, says superannuation should play a greater role in providing Australians with greater financial security.
HIA proposes that employees who do not already own property should be able to make additional voluntary contributions, to be deposited in a home super saver account linked to their super fund. “Savings in the home super saver account would remain untouched for a minimum three years, then could be withdrawn to bridge the mortgage deposit gap,” Silberberg says.
Denis Orrock, general manager of Infochoice, says Labor’s plan will “not make property more affordable or attainable for those struggling to afford home ownership”. Using an example of a family earning $100,000 putting four percent of pre-tax salary into savings returning 6.8 percent, Orrock finds their balance after five years, $23,825, will be considerably less than the growth in the value of an average home over the same time. “A $350,000 home increasing in value at four percent a year would be valued at $427,500 after five years,” he points out.
Orrock suggests the answer lies more in shared equity schemes, such as the equity finance mortgage launched earlier this year by Rismark International and Adelaide Bank. It provides a loan of up to 20 percent of the value of the property interest free. The payback comes when the property is sold and the equity partner can take up to 40 percent of the capital gain.
Federal government investment in these private shared equity schemes would provide real capital for private sector suppliers to actively tackle affordability outside of just first home buyers, who represent only 15 percent of the overall housing market, Orrock says.
“Shared equity loans allow families the ability to significantly decrease their monthly repayments while increasing their purchasing power.”
From Money Magazine
By Pam Walkley
*Check with each State authority regarding the current terms in qualifying for First Home Owner Grants.
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