If you feel a little behind on your home ownership goals — or if you’re wondering whether home ownership should even be one of your goals — don’t worry. First, you’re not alone. Second, it’s harder to save up for a home than it’s been in a long time.
10 Years to Save
A recent CNBC article on the difficulties of saving up that down payment noted that it now takes nearly a decade to accumulate the cash. (In Australia, average house prices are even higher.)
Here’s what CNBC had to say:
Rent and insurance add nearly three years to the time it takes a typical renter to save up for a 20% deposit on a median-priced home. That’s because the typical renter spends about 34% of his or her income on housing. It takes the typical renter about eight years to save for a deposit or down payment for a property. They can only do this if they are able to stash away about 16% of their income each year. And of course, in some locations that’s easier to do than in others.
The initial Deposit can takes approx Eight years
If you can set aside 16-20 % of your income each year in addition to the 34% you’re likely already putting towards housing costs.
Plus the 15% you’re supposed to be putting towards retirement.
And that three-month emergency fund you’re trying to save up.
And debt repayment.
And so on.
Although an InsurandGo study shows young Australians under 30 years of age are divided on whether buying a home or travelling is more important, 64 per cent of Australians still regard home ownership as more important than travel.
Following two years of declines in house prices nationally, consumer attitudes to housing affordability have improved. Slightly more than half of Australians think affordability is better relative to a year ago, and almost half think it will be still more affordable in a year’s time.
However, according to CoreLogic’s Housing Affordability Report 2019, some 83 per cent of non-property owners are still concerned about being able to afford their first home.
The ratio of dwelling values to household incomes remains elevated, tracking 6.5 times higher than household incomes. While that has declined from 6.9 times in mid-2017, it’s still significantly higher than back in the early 2,000’s.
Despite the lowest mortgage interest rates on record, consistently low-income growth is adding to affordability pressures.
The report identifies some key trends:
- Millennial’s are keeping the ownership dream alive – Some 81 per cent of Australians believe home ownership is important (down from 89% in the 2017 survey). Younger generations, who struggle with housing affordability the most, are feeling the most passionate; 86% of Millennial’s rate home ownership as important.
- Australians are finding it hard to secure a loan – Loan approval is the second biggest obstacle to home ownership. The tightening of credit availability following the Banking Royal Commission means there is now much greater focus on a borrower’s expenses.
- ‘Cubby House Syndrome’ is worsening – Children are staying at home longer, with most saying they’ll be 30 before they can afford to move out.
So if you feel like you should be a homeowner by now, or should be setting aside more money for that down payment, or should be living in an apartment that’s bigger than a one-car garage, well… I mean, I can’t tell you how to feel, but I can suggest that you not beat yourself up over it.
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