Only way to get into the property market amid rising house prices

As first-time buyers are priced further out of the market, there’s only one strategy left in order to buy – and they probably won’t like it.

Property prices around Australia are at all-time highs.

CoreLogic data showed the value of Australian property increased by over $1.1 trillion in just five months over the back end of 2021, meaning it’s never been more expensive for first homebuyers to enter the market.

CoreLogic also found the Australian dwelling market increased 20.3 per cent in the year to September 2021, which is the highest rate of annual appreciation since June 1989.

“Affordability is an increasing challenge for many segments of the market, but particularly first homebuyers,” CoreLogic head of research Eliza Owen said.

But given the strength of the Australian property market and consistent growth in property values, the longer first-time buyers wait to enter the property market, the more challenging it will be.

No doubt it takes a serious amount of effort to make it happen, but it is all possible if you have the right approach.

Here, I unpack the key things you can do to make your first property purchase happen faster and easier.

Get clear on your target

Because your property deposit is likely to be a big number that requires you to put in a fair bit of work to pull together, it can seem almost impossible. Getting laser focused on exactly how much you need will give you a significant advantage, by setting a clear target for you to aim at and timeline to work towards.

There are a heap of different ways you can buy your property. You can spend (and borrow) at different levels, buy as a home or investment, leverage first homebuyer concessions, or use a family guarantee. The different options all impact your money differently, both today and after your purchase.

Buying a house involves sitting down and working out what is realistic.

Having a solid plan before you jump in is the key to getting this right. Making the very best property move for you really depends on what’s most important to you.

Do you really want to own the property you live in, or is this less of a concern? Can you afford the sort of property you’d want to live in? Do you have cheap rent currently? And what are the things you want to do with your life, career and income over the coming years?

If you want to plan a smart property purchase, you should be thinking not only whether the property you’re looking to buy will be a good investment, but how it will fit in with your situation and the life you want to live.

Understand whether using a family guarantee might work for you

This option isn’t one that will work for everyone, but using a family guarantee can help you get into the property market without needing to save a deposit. If this option is something you think might be possible for you, do your research and get some good advice – then build it into your property plan.

Your savings plan and deposit timeline

I get that budgets are boring, but knowing how much you want to be spending and how much you have leftover for your savings and property fund is crucial to making your property purchase actually happen.

Having a good budget doesn’t need to mean making huge sacrifices or counting every single dollar you earn and spend. It simply means that you’ve figured out your ideal mix of priorities between spending on your day-to-day and saving money for your investing.

You need to lay the groudwork for achieving that first property purchase. Picture: NCA NewsWire/David Swift

Once you’ve set your spending and saving priorities and have a clear target to buying a property, you can put the two together to map out a timeline to build your property deposit and enter the market.

This will give you a huge motivational boost, as you’ll be able to see that what you want to do is achievable – and set clear expectations on when you’re going to get there.

If after mapping out your timeline it’s not quite coming together in the time frame you want, don’t be discouraged – this is completely natural and just means you have a bit more work to do. Circle back to your spending and savings plan and look at what you can change to shift your timelines.

Pro tip: Don’t fall into the trap of thinking you can only increase savings by reducing your spending. Consider what you can do to increase your income, whether that’s upskilling, pushing for a promotion or pay rise, or starting a side hustle.

Stepping stones to your dream home

Understand that there can be stepping stones to your dream home. Trying to save your dream home deposit in cash while property values are increasing can be like chasing a rainbow.

Getting into the property market with a ‘stepping stone’ property can help you to create a foothold in the property market, and mean that you have at least some property behind you. This way if the market rises, your stepping stone property will rise with it, meaning you’re at least keeping up with the growth.

Then, you can focus on building your other savings and investments to add to the property you already have, getting you closer to the ultimate goal of buying your dream home.

The wrap

Buying your first home is a big move, and one of the most challenging financial undertakings most Australians will make. It can seem almost impossible, and as a result it’s easy to fall into the trap of burying your head in the sand, putting this off for a tomorrow that never seems to come around.

But it won’t just happen on its own. You need to put in the time, focus and work to get there. Follow the steps above to make your plan concrete, realistic and achievable – this way you’ll benefit from a motivational boost and have more confidence to follow the pathway to make it happen.

Ben Nash is a finance expert commentator, podcaster, financial advisor and founder of Pivot Wealth, and Author of the Amazon Best Selling Book ‘Get Unstuck: Your guide to creating a life not limited by money’.

Ben has just launched a series of free online money education events to help you get on the front financial foot. You can book your place here.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.