Expert advice for young Aussies looking to buy their first home
Younger Australians are looking to dive into the booming property market by joining forces with siblings and friends to buy their first home.
Younger Australians are looking to enter the booming housing market by pooling money with siblings and friends.
Record-low interest rates and an economic rebound has led to rising house prices, leaving many young people struggling to buy their first home. Jumping onto the property ladder with a sibling or friend is most popular with millennials followed by Generation Z and X’s, according to new research.
The research also found that males are more likely than females to have bought or considered buying a home with siblings or friends.
ING Australia’s head of home loans Julie-Anne Bosich says it’s clear by the research that many are considering purchasing with a sibling or friend and “it‘s possible that it could be driven by the recent increase in house prices”.
“There’s definitely a benefit in that you’ll probably reach your property goals quicker. However, like any investment, it’s not without its risk,” Bosich says.
SHARED GOALS ARE KEY
Bosich says there are a couple of things to consider before buying a property with a loved-one or friend, including making sure you have “similar goals” such as the length of time you want to hold the property for. Also, seek legal and financial advice about ownership options before entering into any financial commitments.
“You might want to create a legally binding co-ownership agreement; make sure you formalise any exit strategies, for example – what will happen if one of you wants to sell, or one of the owners passes away,” she says.
“And make sure you research your mortgage options and be aware that generally speaking you’re both accountable for repaying the loan. So, if one person can’t make their repayments, the other person will need to do it for them.”
Bosich says whatever your investment horizon is, it should be very “very similar” to the person that you’re taking the loan out with.
Generally, you need a 20 per cent deposit or you will have to pay lenders mortgage insurance.
SIBLINGS POOL TO BUY
Sales administrator Talei Blowers recently bought a flat in Ryde, about 25 minutes from Sydney’s CBD, with her older brother Chris, who is an operations manager.
The 24 year-old says it was originally her brother’s idea to buy a home together after struggling to find something affordable.
“We were kind of looking together for a while, but we were just finding everything was quite expensive so then we thought, well, why don’t we go in together,” Blowers says.
“That way with two incomes we were able to borrow more, and it just made more sense from a financial standpoint, going in it together.”
Blowers says she would recommend it to others.
Next on their “to do list” are wills and contracts. “We have to write our wills and do up a bit of contract between us to clearly state who owns what, and then if either of us want to get out in a few years’ time, kind of what the process is,” Blowers says.
The research found that 17 per cent of Australian adults are considering buying or have bought a home with a sibling or friend in the past year.
Of those looking to dive into the property market, 58 per cent are considering purchasing or have bought a home with a friend or sibling, according to a new survey of more than 1000 people conducted by YouGov for ING Australia. Some 27 per cent say they are considering purchasing or have purchased a home with two friends or siblings.
JOINT HOME AFFORDABILITY
Nearly half of the 1000-plus people surveyed say they are considering buying with a sibling or friend because it’s the only way they can afford to get on the property ladder. Of those, 65 per cent say they both plan to live in the property, while 17 per cent plan to rent it out.
Almost 40 per cent of people who have purchased or are considering purchasing are doing so to help their friend or sibling out, and 37 per cent already own properties and have or are thinking about purchasing to help grow their property portfolios.
National Australia Bank boss Ross McEwan recently told a parliamentary hearing that house prices may rise more than 10 per cent this year.
Are you wealthy? And in what ways? It’s more than just money
Definitions of wealth are not just financial, and AI will tell you exactly that. See how you measure up.
Share tips: experts’ buy, hold and sell recommendations
A mixed bag of share tips this week has something for everyone, just like global financial markets last week. See their suggestions.