Australia’s combined capital cities now boast a median house price of a substantial $882,000, while units are not much more affordable at $800,000. Given these elevated property prices, parents frequently find themselves pondering ways to support their children in entering the property market and securing a foundation for their future.Â
First-time homebuyers often face the daunting prospect of providing a 10% to 20% deposit, along with additional expenses such as stamp duty. Saving for a deposit becomes a seemingly insurmountable task for young individuals, especially considering the potential doubling of property prices over an 8 to 10 year savings period.
This predicament poses a significant barrier for first-time homebuyers. So, how can parents play a role in overcoming this challenge?
1. Contribute to the DepositÂ
Providing a substantial sum of money that your children can utilize as a deposit is one way parents assist in getting their kids onto the property ladder. While it’s a considerable undertaking, parents may choose to incentivize their children by matching the deposit. For instance, parents contribute $100k in equity, and if the child saves $100k, a matching deposit is achieved.
To purchase a median price home, the average deposit required in Sydney, Melbourne and Brisbane is as follows:
City
Median property price
10% deposit
Loan size
20% deposit
Loan size
Sydney
$1,099,000
$109,900
$989,100
$219,800
$879,200
Melbourne
$768,000
$76,800
$691,200
$153,600
$614,400
Brisbane
$747,000
$74,700
$672,300
$149,400
$597,600
Source: CoreLogic, September 2023Â
2. Guarantor on a Loan
Parents can offer financial assistance without exposing themselves to undue risk by becoming guarantors on a loan. Options such as Parental Guarantee and Family Guarantee provide limited guarantee loans, with the guarantor only liable for a portion of the mortgage, typically 20% or less.Â
3. Joint VentureÂ
If a direct financial contribution is not preferred, a joint venture could be explored. Parents and children can jointly purchase a property with a 50/50 ownership structure – one party residing in the property, and the other treating it as an investment. Both parties benefit as co-owners of an appreciating asset. Eventually, the children may refinance and buy out the parents or sell the property, with the option for the parents to buy them out and retain it as an investment.
With a growing trend of parents providing financial assistance, data from 2023 indicates an average contribution of $33,278 for a house deposit. Crucially, it is imperative to safeguard one’s financial security while assisting children. Seeking advice from qualified financial planners and mortgage brokers can help explore viable options and devise solutions that align with both parent and child interests, both in the present and future.Â
FAQ
A: Parents can assist by contributing to the deposit, becoming guarantors on the loan, or entering into a joint venture to purchase the property together. Each option has its benefits and considerations, depending on the family’s financial situation and goals.
A: The average deposit required varies by city, with Sydney, Melbourne, and Brisbane requiring substantial amounts for both 10% and 20% deposits. For example, purchasing a median-priced home in Sydney might require a deposit ranging from $109,900 to $219,800.
A: Yes, parents can become guarantors on a loan through options like Parental Guarantee and Family Guarantee, which provide limited guarantee loans. This means the guarantor is only liable for a portion of the mortgage, typically 20% or less, minimizing their financial risk.
A: A joint venture allows parents and children to co-own a property, with one party living in it and the other treating it as an investment. This arrangement benefits both parties as co-owners of an appreciating asset and provides flexibility for future financial decisions.
A: In 2023, parents are providing an average contribution of $33,278 to help their children with house deposits. This financial assistance is crucial in helping first-time homebuyers overcome the barrier of saving for a deposit amidst rising property prices.
A: Parents should carefully evaluate their financial security and long-term goals. Consulting with qualified financial planners and mortgage brokers can help identify the best strategies to assist their children while safeguarding their financial well-being.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilizes her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Brisbane’s Property Market: Trends and Investment Opportunities
No matter whether you are in the market for a home or an investment property, it makes financial sense to buy in an area where values are tipped to rise. But where do you look? Here we will unveil the Australian cities where population growth is tipped to turbo-charge the property market.
According to PropTrack, one of the biggest drivers of property prices right now is population growth.
Let’s look at the cities more people are expected to call home.
Is the regional renaissance over?
During the height of the Covid-19 pandemic, Australians were flocking to regional areas. The population of regional Australia grew by 70,900 people during 2020-21 – the first time in over 40 years that the regions outpaced capital cities.
However, the Covid-inspired rush to the regions is reportedly over.
Despite the new work-from-home trend, the reopening of borders is seeing a return to urban living. According to property exchange platform PEXA, this will see two-thirds of Australia’s population growth concentrated in four cities over the next two decades.
Which cities are set to benefit?
PEXA is predicting a population growth of 7.4 million between now and 2041. That is a lot of people looking for a place to live. It is not just about net migration to Australia either.
Regional dwellers, especially younger people, are expected to head to urban areas, attracted by the availability of study and work opportunities.
The upshot is that two million new homes will be required over the next 18 years, and 67% of population growth will be concentrated in Sydney, Melbourne, Brisbane, and Perth.
PEXA says the four hotspot cities require vast numbers of new homes:
723,000 in Melbourne (that’s 40,000 new homes per year or 772 per week)
582,000 in Sydney
381,000 in Brisbane, and
334,000 in Perth.
Meanwhile, Adelaide is predicted to need at least another 141,000 dwellings between now and 2046.
What does this mean for property buyers?
For starters, increased demand on this scale is expected to continue to push up property prices unless supply can increase at a similar pace.
Despite higher interest rates, already we have seen values rise in all four cities in the past 12 months. CoreLogic says property prices have soared 7.3% in Sydney over the past year, 5.0% in Brisbane, 8.8% in Perth and 1.5% in Melbourne (and 5.0% in Adelaide).
So, if you own property in these cities, you could be sitting on more equity than you realise, with potentially more to come. Or, if you are considering buying, particularly as an investor, it could be worth looking at one of these hotspot cities, even if you don’t live there.
Are you home loan ready?
No matter where you plan to buy, understanding your borrowing power is a key starting point.
Give us a call to find out how much you can borrow and what grants and schemes you might be eligible for to help fund your next purchase.
FAQ
A: The four cities predicted as upcoming real estate hot spots are Sydney, Melbourne, Brisbane, and Perth.
A: Population growth in these cities is driven by a combination of net migration to Australia and regional dwellers, especially younger people, moving to urban areas for study and work opportunities.
A: It is estimated that 2 million new homes will be required over the next 18 years, with 67% of population growth concentrated in these four cities.
A: Melbourne requires 723,000 new homes, Sydney 582,000, Brisbane 381,000, and Perth 334,000.
A: Yes, the Covid-inspired rush to regional areas is reportedly over, with a return to urban living now being observed.
A: Increased demand on this scale is expected to continue pushing up property prices unless supply increases at a similar pace.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilizes her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Modern Solutions to Housing Affordability: A Comprehensive Guide
Housing affordability remains a critical issue in today’s economy. With rising property prices and changing market dynamics, finding affordable housing solutions has become more challenging than ever. This guide explores modern approaches to improving housing affordability, offering insights for policymakers, stakeholders, and potential homebuyers.
Current State of Housing Affordability
The landscape of housing affordability in Australia is marked by increasing property prices and a competitive market. Factors such as low interest rates, urbanization, and demographic shifts have contributed to this trend, making affordable houses harder to come by for many Australians.
Revisiting Government Recommendations
The original report presented to the federal parliament outlined 16 recommendations to tackle housing affordability. These ranged from tax reforms, such as replacing stamp duty with land tax, to innovative financing models like using superannuation for home loans. Assessing the implementation and impact of these recommendations is crucial in understanding their effectiveness.
Innovative Approaches to Housing Affordability
Innovative solutions are key to addressing the housing affordability crisis. Sustainable urban planning that increases housing density in under-utilized areas, community housing projects, and leveraging technology for affordable housing development are some of the approaches gaining traction. These solutions aim to create a more inclusive housing market.
The Role of Private Sector and Community Initiatives
Private sector and community-led initiatives have shown promise in improving housing affordability. From developing affordable rental models to building community housing, these initiatives complement government efforts and provide practical solutions to housing challenges.
Policy Reforms and Future Directions
Looking ahead, policy reforms play a pivotal role in shaping the future of housing affordability. This includes revising planning regulations, incentivizing affordable housing development, and exploring new funding models. Learning from successful international housing models can offer valuable insights for future policy directions.
Practical Tips for Homebuyers
For individuals struggling with housing affordability, understanding the market and leveraging available resources is key. This includes taking advantage of government grants and schemes designed to help first-time buyers and those seeking affordable houses.
Call to Action for Policymakers and Stakeholders
Addressing housing affordability requires a collaborative effort. Policymakers, industry stakeholders, and community organizations must work together to implement effective solutions. This collaborative approach is essential for creating a more balanced and accessible housing market.
Collaborative Solutions for Affordable Housing
Advocate for policy reforms like incentivizing affordable housing and streamlining approval processes.
Encourage industry engagement in affordability solutions through innovative construction and sustainable practices.
Highlight community organizations’ role in fostering initiatives like community land trusts and cooperative housing.
Data-Driven Decision-Making
Emphasize using data for effective housing policies, including analytics for identifying affordability challenges.
Advocate for transparency in market trends through regular reporting on housing prices, rental rates, and demographics.
Suggest involving experts in urban planning, economics, and housing development for valuable insights.
Public Awareness and Advocacy
Stress the importance of public awareness campaigns to educate citizens about housing challenges and solutions.
Support community advocacy groups focused on affordable housing to ensure diverse voices are heard.
Call for inclusive decision-making processes addressing unique challenges faced by different demographic groups.
Monitoring and Adaptation
Advocate for regular assessment of policy impacts and data-driven adjustments for ongoing effectiveness.
Emphasize flexibility in approaches to housing affordability based on changing conditions.
Encourage learning from successful case studies and best practices to inform future strategies.
Addressing housing affordability is a multifaceted challenge that demands a comprehensive approach. Incorporating modern solutions and fostering collaboration among stakeholders, including the expertise of mortgage brokers and financial planning, can pave the way for a future where affordable housing is accessible to all.
Frequently Asked Questions
What are the current trends in housing affordability?
Current trends include rising property prices, fluctuating interest rates, and evolving market dynamics, which have made finding affordable housing more challenging.
How can I stay informed about changes in the housing market?
Staying informed involves researching local market trends, following economic news, and possibly consulting with real estate professionals to understand the latest developments in housing affordability.
What innovative approaches can improve housing affordability?
Innovative approaches include sustainable urban planning to increase housing density, community housing projects, and leveraging technology to develop affordable housing solutions.
What policy reforms are needed to address housing affordability?
Policy reforms may include revising planning regulations, incentivizing affordable housing development, and exploring new funding models to effectively address housing affordability issues.
How can policymakers and stakeholders collaborate to improve housing affordability?
Collaboration involves joint efforts in implementing effective solutions, sharing resources, and fostering partnerships between government, private sector, and community organizations.
Where can I find resources for further reading on housing affordability?
Resources can be found through real estate websites, economic forums, government housing agencies, and financial advisory services.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Rental Crisis: Turning to Homeownership in Australia
In the face of the escalating rental crisis in Australia, many are reevaluating their long-term housing strategies. With rental prices soaring and vacancy rates plummeting, the dream of homeownership is becoming more appealing and, for some, a necessary escape from the rental market’s volatility.
Current Rental Market Analysis
The rental crisis Australia is currently experiencing is unprecedented. Factors contributing to this crisis include a surge in demand, limited housing supply, and economic pressures. These elements have combined to create a challenging environment for renters, with many facing increased rental costs and limited options.
Impact of the Rental Crisis on Homebuying Decisions
The rental crisis is significantly influencing Australians’ decisions to buy homes. Faced with rising rents and uncertainty, the stability and financial benefits of homeownership are becoming increasingly attractive. For many, buying a home is not just a financial decision but also a move towards a more secure and controlled living situation.
Government Schemes and Incentives for Homebuyers
In response to the rental crisis and the broader housing affordability issue, the Australian government has introduced several schemes and incentives to assist potential homebuyers. These include first-home buyer grants, stamp duty concessions, and low-deposit schemes, which are making homeownership more attainable for many Australians.
Financial Planning for Homeownership
Transitioning from renting to owning a home requires careful financial planning. Prospective buyers should consider their long-term financial goals, assess their borrowing capacity, and plan for associated costs such as mortgage repayments, property taxes, and maintenance expenses. Creating a budget and building a savings plan are crucial steps in preparing for homeownership.
Long-Term Benefits of Homeownership
Owning a home offers several long-term benefits over renting. These include the potential for property value appreciation, the ability to build equity, and the freedom to make modifications to the property. Homeownership also provides a sense of stability and security that renting cannot always guarantee.
Challenges and Considerations in the Home-Buying Process
While homeownership offers many advantages, it also comes with its own set of challenges. The current market is competitive, with high property prices and significant demand. Potential buyers should be prepared for these challenges and consider various factors, including location, property type, and market timing, when making their purchase.
Navigating Challenges and Key Considerations in Homeownership
Market Dynamics and High Property Prices: Discuss the impact of high property prices on the home-buying process. In a competitive market, potential buyers may face affordability challenges. Delve into strategies such as budgeting, exploring different financing options, and considering emerging neighborhoods to navigate the hurdle of high property prices.
Demand-Supply Imbalance: Address the significance of demand-supply dynamics in the current real estate market. With significant demand and limited supply, potential buyers may encounter fierce competition for desirable properties. Offer insights into strategies for standing out in a competitive market, such as prompt decision-making, pre-approval for financing, and effective negotiation skills.
Location Considerations: Emphasize the importance of location considerations in the home-buying process. Location significantly influences property prices, amenities, and future appreciation. Guide potential buyers in conducting thorough research on neighborhoods, considering factors like proximity to work, schools, and public services, to make informed decisions aligned with their lifestyle and long-term plans.
Why Is There a Rental Crisis?
The rental crisis is primarily driven by a combination of high demand for rental properties, a shortage of available rentals, and economic factors affecting affordability. Understanding these underlying causes can help prospective buyers navigate the market more effectively.
Role of Professional Financial Advice
Navigating the home-buying process amidst a rental crisis can be complex. Professional financial advice, including mortgage broker services like Zippy Financial, can provide guidance on loan options, government grants, and overall financial planning for buying a home.
The rental crisis in Australia is prompting many to consider homeownership as a viable and attractive alternative. With the right planning, financial advice, and understanding of the market, turning to homeownership can be a wise decision in these turbulent times.
Frequently Asked Questions
What is causing the rental crisis in Australia?
The rental crisis in Australia is driven by high demand for rental properties, a shortage of available rentals, and economic factors affecting affordability.
How is the rental crisis affecting Australians?
The crisis is leading to increased rental costs, limited housing options, and instability for renters, prompting many to consider homeownership as a more stable alternative.
Why are people considering homeownership in response to the rental crisis?
Homeownership offers stability, potential for property value appreciation, and freedom from the uncertainties of the rental market, making it an attractive option during the rental crisis.
What financial planning steps should be taken when considering homeownership?
Prospective buyers should assess their borrowing capacity, create a budget, plan for mortgage repayments and other associated costs, and build a savings plan.
How can professional financial advice assist in the home-buying process?
Professional financial advisors can provide guidance on loan options, help navigate government grants, and offer overall financial planning advice for buying a home.
What should renters do if they are struggling due to the rental crisis but are not ready to buy a home?
Renters should explore all available options, such as seeking more affordable rental areas, negotiating rent, or considering shared housing, while also planning and saving for potential future homeownership.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Resurgence of Inner-City Rental Markets: Dive into Current Trends and Predictions
Property prices have soared almost 7% this year alone. With the upswing predicted to continue, we look at what is driving national housing values higher and why it could pay to get into the market sooner.
So, what is pushing prices higher?
The key factor putting a rocket under property prices is a shortage of homes listed for sale. Homeowners are sitting tight rather than selling across several cities, and that is increasing competition between buyers.
According to CoreLogic, Adelaide, Brisbane and Perth have particularly low levels of homes for sale – about 40% less than previous 5-year averages. There is a bit more choice for buyers in Sydney and Melbourne, but both cities are still recording housing price gains (Sydney in particular). That is because ricing prices are not just about a lack of homes listed for sale. Record levels of net overseas migration are also a contributing factor.
In the year to March 2023, net overseas migration added 454,400 people to our population. That is an extra 1,245 people each day, all looking for a home. And according to ABS data, most immigrants settle in Sydney and Melbourne.
So, despite the high interest rates, there is an upward pricing pressure on the nation’s five biggest capital cities (Hobart, Darwin and Canberra meanwhile have all seen house prices drop over the past 12 months).
What does this mean for home buyers?
As home prices nudge towards new highs, ProTrack says last year’s price falls have been completely reversed. And most of the data suggested that prices are unlikely to take a tumble any time soon. That’s because it is possible that interest rates have peaked, population growth is rebounding strongly and there is a shortage of new home builds.
Already we are seeing a surge in home loan applications as more Australians recognise the current market provides a window of opportunity to buy before values rise even higher.
If you have got your eye on the property market, call us today and we can help you assess your borrowing power in the current climate, and even help line you up with pre-approval so you are ready to strike when the opportunity arises.
Frequently Asked Questions
Why are house prices currently surging?
The surge in house prices is often attributed to a combination of low interest rates, limited housing supply, and increased demand from buyers.
How do low interest rates affect house prices?
Low interest rates make borrowing cheaper, allowing more people to afford mortgages, which increases demand for housing and drives up prices.
Is the COVID-19 pandemic affecting house prices?
Yes, the pandemic has influenced house prices by changing homebuyer preferences and causing disruptions in the housing supply chain.
How does population growth impact house prices?
Population growth increases the demand for housing, which can lead to higher house prices, particularly in urban areas.
Can foreign investment affect local house prices?
Foreign investment in real estate can increase demand and prices, particularly in major cities and popular locations.
Is it a good time to buy property during a price surge?
This depends on individual circumstances. Potential buyers should consider market conditions, personal finances, and long-term investment goals. Consulting with a real estate expert is advisable.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
Comparison Rate calculated on a secured loan amount of $150,000 for a term of 25 years. WARNING: This Comparison Rate is true only for the example given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different Comparison Rate. Fees and Charges Apply. Terms and Conditions are available on request.
