Six sure-fire tips for millennials to get on the property ladder
Owning your first home has always been hard, but is it now harder than ever for millennials? If you were born between 1981 and 1998 and are struggling to afford your first home, you’re not alone. But the good news is it can be done.
A recent HSBC survey looked at home ownership amongst millennials around the world. Beyond the Bricks captured the views of more than 9,000 people in nine countries revealing how they feel and behave when buying, renting and owning their home.
Most valuable were the practical tips that were unearthed, giving those who wanted to break into the first home market a real advantage.
1, Saving enough for a deposit
The affordability challenge is one that affected all millennials to different degrees. Seventy-five percent of Australian respondents still planned to buy1 even though they felt they had not saved enough for a deposit.
When explored further, it was found that ‘budget blindness’1 was a major issue. Forty-nine percent of Australian millennials had only an approximate budget, and 34% had no budget at all. The key lesson here was from the 17% that had set a precise budget and were in better shape for their future home purchase.
2, Yes, sometimes sacrifices have to be made
When it came to budgeting, millennials have similar views on how to save wherever they are in the world. The most consistent approach was to spend less on going or eating out with 58% using this method2 to save. Twenty-five percent opted to move in with a relative to save for a deposit, and 13% decided to buy with friends. When considering what you may give up, it’s important to weigh up the long-term effect. What would happen if you decide to buy with friends now, and something changes in the future?
3, Look at your salary. Is it time to ask for a rise?
Another large barrier was millennials’ salaries. Sixty-one percent felt that their salary was not high enough3 and was holding them back. So, if you fall into that basket, maybe it’s time to arrange a salary review and see if you can increase your pay packet.
4, Be prepared for additional costs
While budgeting and being ready with a deposit is one part of homeownership, once purchased, a new home can soon deliver some unexpected costs. Thirty-four percent of respondents had unexpected furniture costs4. Another 34% did not anticipate the expenses involved with removal services. Thirty-three percent of new homeowners were surprised with the legal fees involved. When you are ready to purchase, always aim to have a reserve set aside for your new plans and the unexpected.
5, The bank of mum and dad
While buying your own home is a win for independence, to get there, especially without a deposit, the bank of mum of dad may be an option. The fact is 30% of millennial homeowners in Australia received financial assistance from their parents5. This parental support is much higher in the United Arab Emirates, with 50% of millennials relying on the ‘bank of mum and dad’. So if you want to get ahead, it could be an option worth exploring.
6, Find the right home loan for you
While the excitement of finding the right property can be all consuming, it’s important to balance that with choosing the right home loan. Think of your mortgage as long-term plan. Decide the length of the loan that suits you, the interest rate, and if it’s flexible enough for you now and in the future.
Nobody is arguing that getting onto the property ladder can be tricky. However, a bit of preparation and planning could help you get your own place sooner than you thought.
1, Q. Have you set an overall budget for your home purchase? ‘
2, Q. Which of these would you consider to help you own a home? (Base: Millennial non-owners who intend to buy)
3, Q. Which of these need to happen before you are able to go ahead with buying a home? (Base: Millennial non-owners who intend to buy)
4 Q. For the following costs, compared to what you expected, did you spend... (Base: Those who have bought a home in the last 2 years and spent more than they expected)
5, Q. What actions did you take to manage the unexpected costs? (Base: Millennials who bought their home in the last 2 years and experienced unexpected costs)
Reproduced with permission from Beyond the Bricks, The meaning of home, published in 2017 by HSBC Holdings plc.’ HSBC is a trademark of HSBC Holdings plc and all rights in and to HSBC vest in HSBC Holdings plc.