Young property buyers realise that it takes two to tango
More Aussies are pairing up with significant others to break into the property market, and to give their borrowing power than extra oomph.
Despite signs of cooling, Australian property is by no means accessible for young purchasers so it’s not surprising that 66% of Australians have teamed up with a significant other, family or friend to boost their borrowing power, research from St. George Bank reveals.
They say that two minds are better than one, and the same can hold true for property buying, but like any important decision, making joint decisions doesn't come without compromise.
Results from the survey showed that 74% of respondents have found their ideal property. Of those who weren’t as fortunate to score their dream property, they had to find middle ground on factors including location (50%), price (46%) and layout and space (45%).
The paired-up first home buyers ranked evaluating properties with good value as the most difficult process (57%) followed by selecting a location (47%) and determining affordability (42%).
Although housing affordability saw a 2.7% improvement in the March quarter, based on new figures from the Housing Industry Association, affordability still remains an issue for many young first home buyers. As a result, it seems that teaming up with a second borrower is the logical way to get a foothold in the property market.
By purchasing with someone else, you can not only improve your borrowing power, but you can also split the costs including stamp duty, legal and valuation charges. However, it's important to remember that most banks take into account both applicants income, credit history and liabilities-- so choose your co-borrower carefully.
The research found that entering into a co-borrowing agreement halved house hunting or property search time. That is, 76% of participants took six months or less to find a home compared to 8% for whom it took upwards of 12 months. This could greatly reduce your property search costs.
The reported savings approaches included being disciplined with household expenses (60%), cutting back on entertainment and leisure (55%), and living with family (29%). If you're thinking of purchasing with a partner, friend or family member, make sure you develop a budget strategy and make an effort to trim down existing expenses (e.g. gym memberships or travel).
Finally, be proactive about making extra cash. Consider renting out a spare bedroom in your house or using your skills outside your workplace. For instance, if you're a graphic designer, consider taking on freelance jobs on the weekend.
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