How younger Aussies are outsmarting the property boom to get into the market

Vanessa De Groot 30 Mar 2022

First-home buyers are bearing the brunt of worsening housing affordability issues in Australia, with prices growing higher and the deposit hurdle worse than ever.

The median house price in Australia rose by 22.7% last year alone, PropTrack data shows, with wages failing to keep up with price growth.

It can now take almost a decade to save a 20% deposit in some areas, and then there are costs on top of that.

All of this means that many younger Aussies are struggling to get into the property market.

Many go the traditional route of buying with an intimate partner, while others are lucky to have the bank of Mum and Dad to help… but what do you do if those options aren’t available to you?

Cameron Kusher, director of economic research at PropTrack, said it’s harder than ever for first-home buyers to battle against high prices and borrowing barriers.

“Saving a deposit and the impost of lenders’ mortgage insurance pushes back the timeline in which purchasers can enter into the housing market for the first time,” Mr Kusher said.

Government schemes, like the First Home Guarantee – which the federal government is expanding as part of the budget, handed down on Tuesday – are helpful, he said.

“It should be noted that the number of places available each year is still well below the number of first home buyers in the market in any given year.”

Despite the challenges, many first-timers have managed to get a foothold on the property ladder regardless, outsmarting the boom by adopting creative strategies.

Teaming up with a mate 

Joining up with a non-intimate partner such as a sibling, parent, cousin, friend, colleague or even a like-minded stranger – sometimes known as ‘mortgage mates’ – is an increasingly popular strategy.

It’s becoming so common that some lenders now have tailored loan products, and there is even a website called Mortgage Mates, described as the Bumble or Tinder of home ownership.

Since its recent launch, the service has started to match like-minded strangers to help them buy a home together.

Research from CommBank late last year found more than a quarter of Australians have considered buying property with a non-traditional partner, with two-thirds saying affordability was the reason behind it.

The lender has a product called Property Share that allows borrowers to split the cost of buying a home with a mortgage mate, while retaining control of individual finances.

Mortgage Mates founder Daisy Ashworth said the service was seeing increasing traffic, with the first purchase expected to be made by a match in the next six months.

“Housing affordability in Australia is unprecedented now – that’s driving why people are looking to buy with a stranger,” Ms Ashworth said.

“People don’t grow up thinking this is how their home ownership dreams will come true, but they’re saying, ‘I’m 30 and I don’t want to wait to meet a partner to buy a house, so I’m looking at alternative ways to enter the market’.”

Australian Housing and Urban Research Institute managing director Michael Fotheringham said pairing up with non-intimate partners to buy a home was, in a sense, the new way of share-housing.

“You build equity in the property you collectively own and then each of the people move on to purchase their own place or with a partner down the track,” Mr Fotheringham said.

“It’s a step towards individual home ownership.”

While it can be a great way to get a foot on the property ladder, Palise Property owner and buyers’ agent Steve Palise said mortgage mates need to have risk mitigation front of mind.

“Over time everyone’s expectations and life circumstances change,” Mr Palise said.

“It is very important to have clear exit strategies and a legal contract between the parties should this occur. 

“Often, things such as having a child, broken relationships, and financial tough times will dictate if the property needs to be sold, even if the other party does not want to.”

Jarad* teamed up with his best mate in 2013, when he was 32, so they could both get a foothold on the property ladder, and it’s been more than successful than he imagined.

“We thought we were buying at the top of the market back then for a two-bedroom apartment in Surry Hills, but we now have a valuation for almost double what we paid,” he said.

The friends went in with a 55 to 45% ownership split and initially lived in the property together before renting it out. 

They purchased another property, a two-bedroom apartment in Erskineville, just before Christmas that they are now living in, using the equity from the first purchase to fund the deposit.

“With the first property, we wanted to live in certain areas, and after looking for almost a year we were just below being able to afford to buy, but my friend earned more so we changed the ownership percentages and could afford to buy then,” Jarad said.

“I would totally recommend it; it has worked out so well with my mate. There is no way I would have been able to get into the market on my own.”

Buying an investment property first

The notion of ‘rentvesting’, where first-timers buy an investment property in a growth area they can afford and rent where they want to live, is gathering momentum as a strategy.

“The key benefit of doing this is it enables the buyer to get into the market sooner rather than later, without sacrificing where they want to live and their short-term happiness,” Mr Palise said.

“With a longer-term vision, and if their investment property performs well, it will give them ability to be able to buy their ‘dream home’ down the track.”

Mr Palise said there were many regions around Australia where you can buy quality investment properties for as little as $300,000, but thorough due diligence was necessary before buying.

“One of the drawbacks to this strategy is the investor will often have to buy in a region they are unfamiliar with,” he said.

Another drawback is that you don’t get access to government grants given to first-home buyers, but you get favourable tax settings available for investors, which may make buyers better off, Mr Fotheringham said.

Liam Carmody became a rentvester to get into the property market, buying his first property in Tasmania before going on to build a property portfolio.

He started out renting with his now-wife Amie in Wollongong, but then the couple moved into a share house with strangers to help them save for a few years, as well as doing any jobs they could to make money.

Once they had built a big enough deposit, the pair purchased their first property – a three-bedroom house in Launceston, for just under $300,000 in the mid-2010s.

The couple also relocated to a remote location near Armadale later to save more money, with Mr Carmodys’s employer subsidising rent for 18 months.

With the money saved and growth in their Launceston property, the couple have gone on to buy more investment properties, as well as their own home.

“When we were first looking to buy a property, we were looking at buying an apartment in Wollongong off the plan to live in,” Mr Carmody said.

“For one, we couldn’t afford it but we also didn’t want to buy an apartment because we were talking about having a family and we didn’t want to be stuck with a home we couldn’t live in and have to buy again.

“We decided to buy an investment property first rather than a home because we couldn’t afford to buy the home we wanted.”

He recommends other first-time buyers consider a rentvesting strategy, not only for affordability but flexibility – especially for young buyers that may want to travel or make life changes sooner rather than later.

Moving to cheaper areas 

Some first-timers are moving to more affordable locations – whether that be a different state, city or regional area – in order to buy their first home.

“With working from home and remote options this has also opened the door for first-home buyers to be more mobile in their choice of areas,” PRD chief economist Dr Diaswati Mardiasmo said.

A good example of the difference is a would-be buyer looking to move from Melbourne to Brisbane, Dr Mardiasmo said.

According to PRD data, first-time buyers with a budget of $900,000 or less have access to 3.7% of the residential market in Melbourne’s inner ring, up to 5km from the CBD, and about 53% of housing in Melbourne’s outer ring, 10km to 20km from the CBD. 

That’s based on median home prices, median incomes, and borrowing capacity, to determine the chance of finding a potential dwelling in a particular region.

“However, with that same budget you can access 18.9% of Brisbane’s inner ring and 79.4% of Brisbane’s outer ring,” Ms Mardiasmo said.

Amy Tipton recently purchased a two-bedroom unit in Albury as her first home for $220,000 and will move to the regional city from Melbourne and renovate the property over time.

Working in Albury as a zoologist, the 32-year-old has been commuting to the city for work and renting a home in both Melbourne and Albury for a total of $700 per week.

Buying in the more affordable location will enable her to cut costs by two-thirds and get a foot onto the property ladder at the same time.

“I’m currently based at Frankston on the Mornington Peninsula, and there’s not a chance you can get into the housing market there, unless you’re willing to borrow to the maximum and be really indebted to the bank for the rest of your life,” Ms Tipton said.

“For a one-bedroom apartment in Frankston you will not get anything for less than $400,000. So, looking at house prices in Albury compared to Melbourne and what you can get for your money was a no brainer.

“Albury is regional but close to amenities and only a four-hour train ride to Melbourne.”

Other creative strategies 

Some Aussies are investing in asset classes such as shares or cryptocurrency, or even high-worth collections such as Lego, card games, memorabilia, and stamps to help save a bigger deposit to enable them to get into the market, Ms Mardiasmo said.

“Younger people are increasingly becoming well educated when it comes to investment options, and they are looking at it as an alternative way to build wealth and cashing in later when they are ready to purchase a home.”

Craig Jackson, 26, bought an investment property in Cairns for his first purchase after finding property in Sydney, where he lives, to be “absolutely unaffordable”.

Mr Jackson paid $215,000 for a three-bedroom home in March 2020, using a deposit he had saved largely by investing in cryptocurrency.

“Investing in crypto through the Bamboo app has really helped speed up my savings process, making things like the house deposit possible,” he said.

“I’m fortunate enough to have the property positively geared so it’s essentially paying itself off. It has also grown in value since I bought it.”

To help with gathering a deposit, first-time buyers are also taking advantage of government incentives such as grants and stamp duty discounts, or initiatives such as the First Home Super Saver scheme, which allows eligible participants to save money for their first home inside their super fund.

If buyers can’t afford a whole property, they can also get into the market by buying shares in an investment property, through companies such as BrickX.

Then there is the lesser known deliberative development, which is where future owner-occupiers of a multi-residential property get together and develop themselves, which cuts costs.

Rent-to-own schemes, which enable a renter to purchase a home after a predetermined period, are another option, but can be fraught with danger.

The positives are that it eliminates the need to save a typical larger deposit, to secure finance at the time of purchase, and protects the buyer from any future property price growth in the region if it’s more than the predetermined amount, Mr Palise said.

These can be great for buyers should the market perform well, but if prices go backwards, the renter is then required to purchase the property for more than the market rate. 

“The buyer will not actually own the home until they have made final payment, and they could risk not being able to obtain finance for the property and you would lose all the money you have spent,” he added.

 “As you have zero control on the property until the final agreed payment, the property could also be repossessed by the bank from the current owner.

“You could also be found in breach of the agreement should you miss rental payments.”


Why property is still a great investment in 2022

Michael Yardney 28 March, 2022

2022 promises to be a fascinating year in real estate. While we will not see the same level of overall price growth as 2021, there will still be a substantial uplift in property values over the year.

The difference this year is that the markets will be fragmented.

Last year was relatively unusual.

We experienced a once-in-a-generation property boom where values grew strongly almost everywhere.

Around 98 per cent of locations across Australia recorded rising property values, with many properties rising by more than 20 per cent.

This year is shaping as a more “normal” market, where some locations will still see strong property price growth, some will experience moderate price growth, some locations will languish, and a few locations will see property values falling.

And this will be dictated by local supply and demand, and local economic conditions.

Property values increased by more than 20 per cent in most locations and up to 30 per cent in some areas since the beginning of the pandemic, but at a time when wages growth was minimal.

This means properties are going to be less affordable for many Australians who just can’t borrow any more, especially as banks are raising their fixed-term interest rates.

We have already seen the first couple of months of this year delivering no price growth in our two big capital cities – Sydney and Melbourne.

Yet property values keep rising in the more affordable cities of Brisbane and Adelaide, where wages are much the same as the rest of Australia, yet properties are only half the price of Sydney.

Now, I’m not suggesting there won’t be capital growth in Sydney and Melbourne this year.

There will be.

But it will be segmented to areas where higher-income, more affluent people live and can afford to, and are prepared to pay more to upgrade their homes and live in aspirational locations.

Other areas that will perform strongly this year will include gentrifying suburbs, as millennials move out of apartments and into homes as they enter the family-formation stage of their lives.

Of course, many of the factors that led to the property boom of 2021 will still be in place in 2022 – strong employment growth, rising wages in certain highly skilled jobs, a shortage of A-grade properties for sale, an improving economy and increasing consumer confidence.

But a number of new factors will further underpin our property markets this year:

1. Finance approval data show that more investors are looking at getting into the  market and will replace the first-home buyers, who are now finding properties less affordable.

Investors will also be encouraged by the higher rents that will be achieved this year.

2. Around 200,000 visa holders will be coming to Australia in the next year as our international borders open.

Most will be coming to Melbourne and Sydney where the jobs are, and most will rent for the first few years as they find their feet in their new home country.

2022: The year of a rental crisis

While the pace of house price growth has been slowing, rental growth has strengthened, with vacancy rates around the country at the lowest they’ve been for a long, long time.

In fact, the nation is facing a chronic shortage of homes available for rent.

Similarly, a shortage of rental apartments is also developing, and will only get worse over the coming year.

This shortage of rental properties has evolved over the past five years, starting with the 2017 decision by the Australian Prudential Regulation Authority (APRA) to limit lending to investors, followed by the rhetoric from the Labor Party regarding removing tax benefits for investors prior to the 2019 election.

And, interestingly, there is strong anecdotal evidence that many investors have sold up their properties over the last year, encouraged by news that, nationally, property values rose by more than 20 per cent.

All this means that rents and yields to investors are likely to rise in 2022.

Don’t be scared by the property pessimists

Don’t lose any sleep over the predictions that property values will drop 10-15 per cent in 2023.

In my mind, the big banks’ economists will be wrong – just like they were with their calls of property armageddon in 2020.

Unfortunately, these commentators have a track record of getting their property predictions wrong, underestimating the strength and resilience of our housing markets.

Similarly, their predictions that interest rates will rise soon, some even suggesting June this year, are likely to be wrong as the Reserve Bank will wait for “real” wages growth to increase, and that will take some time yet.

And even when rates do rise, history indicates interest rate rises do not necessarily cause a property market crash.

For the market to crash it would require vendors to have to sell their property urgently and no one out there to buy these properties.

Of course, a crash could occur if…

1. Australia had a recession – that’s not on the cards.

2. Unemployment rose and people couldn’t pay their mortgages – again that looks unlikely in the near future.

3. Households experience mortgage stress– in fact most Aussie households are well ahead on their mortgage payments, with the RBA indicating a third of mortgage holders are two years or more ahead in their payments.

And of course, the banks have stress-tested new borrowers to ensure they can maintain the repayments if interest rates rise 2 or 3 per cent

4. Multiple rapid-fire interest rate rises – again this is unlikely as the RBA doesn’t want our housing market to crash.

As I said at the start, we’re in for a fascinating year in property in 2022, but one where those who make the right investment decisions will look back and be pleased they bought a property at the price they did.


First home buyers to receive help in federal budget, more money for roads and car parks to be announced

Stephanie Borys 28/03/2022

More first home buyers could find it easier to get into the property market, with the government expanding its home guarantee schemes.

The programs, which allow first home buyers to purchase a property with either a 5 or 2 per cent deposit, was set to end in June.

However, with property prices rising and concerns the Australian dream of home ownership is now out of reach for many, the government will again extend the schemes and establish an additional one for people in regional areas.

Housing affordability is an issue many Liberal MPs have been keen to address in the lead up to the federal election as backbencher Jason Falinksi flagged earlier this month, when releasing a federal parliament report on housing.

“We have seen in poll after poll this week, that people are telling us one thing and one thing clearly,” he said.

“Of all the issues that are on the table for this election, housing affordability is the biggest one in most parts of Australia.”

The details will be outlined in Tuesday’s budget and Treasurer Josh Frydenberg said he was confident the programs would help more people who had struggled to get into the market.

“Since January 2020, the government’s Home Guarantee Scheme has helped almost 60,000 home buyers purchase their first home,” he said.

“It’s why, in tomorrow night’s budget, we’re supporting even more aspiring home owners to get into the market.”

The schemes can only be used on homes under a certain price guide outlined by the government and a person is eligible if they earn no more than $125,000 a year and $200,000 for couples.

50,000 places a year

The expanded program includes 35,000 places per year under the First Home Guarantee, which was previously known as the First Home Loan Deposit Scheme.

It allows people to put down a 5 per cent deposit without being slugged lenders mortgage insurance because the government guarantees the loan.

Five thousand places per year will be offered under the Family Home Guarantee, which allows single parents to put down a deposit of 2 per cent.

There will also be a new scheme established called the Regional Home Guarantee (RHG) that aims to encourage more construction outside of capital cities.

It will be available to first home buyers, people who have not owned a property in the past five years and permanent residents, which the government hopes will encourage migrants to settle in regional areas.

To access the regional scheme, applicants must either build or purchase a newly built home and there will be 10,000 places per year available from October 1.

Shadow Treasurer Jim Chalmers said the regional scheme outlined by the government today was very similar to Federal Labor’s approach announced earlier this month.

“They copied our policy today for regional first home buyers, that’s a good thing as far as we’re concerned. It [the scheme alone] won’t solve the whole problem,” he told Channel Nine.

More money for roads, rail and transport

Tuesday’s budget will also include nearly $18 billion for transport infrastructure which will be spent on upgrading and building roads and railway lines.

It includes $1 billion to upgrade the train line between Sydney and Newcastle, $3 billion for key freight projects in Victoria and $1.6 billion for the Brisbane to Sunshine Coast rail extension.

There is also more money for commuter car parks, an echo of the 2019 election campaign when millions of dollars were promised for car parks near train stations.

Many of the car parks still haven’t been built, while others have been scrapped and the Australian National Audit Office (ANAO) found the choice in locations was not based on need and instead focused on Liberal-held or marginal seats.

However, that has not stopped the government from setting aside more than $47 million in this year’s budget, with most of the funding earmarked for Liberal electorates in New South Wales and Victoria.

New projects will get some of the money, but the majority is going to car parks announced three years ago during the last election that are still not finished, such as the commuter car park upgrades in Woy Woy and Panania.

Finance Minister Simon Birmingham defended the additional funding for car parks and said it made up 0.3 per cent of the infrastructure spend that has been announced.

“So, it’s a very small element …. the scale of investment in terms of projects across every major city of the country, across every state of the country is about helping people to get to work and to get home faster and safer,” he said.

“Car parks to access public transport services are an important part of that.”





Rail, Growth Areas Signed Off in $1.8bn SEQ City Deal

Nine new train stations, residential growth areas and a $450 million interchange next to the Gabba Olympic Stadium are south-east Queensland’s top priorities, according to the city deal inked on Monday.

All levels of government signed off on the $1.8-billion infrastructure pact to increase the liveability and connectability of the region as its population booms.

Rail connectivity was a major component of the plans with the $450-million Brisbane Metro Woolloongabba Station at the heart of the city deal.

This will create an interchange between the Brisbane Metro bus system and the Cross River Rail lines alongside the new billion-dollar Brisbane 2032 Olympic Stadium.

There was also $10 million in funding to identify the locations of nine new stations and rail line options between Ipswich and Springfield which has expanded rapidly with the creation of the satellite city.

Plans to connect the new communities in Park Ridge, Flagstone and Yarrabilba to the Logan and Gateway motorways have started with a $1-million business case.

South-east Queensland could accommodate more than 800,000 new homes through unlocking new economic development corridors, according to the deal.

There will be $5 million spent on a business case for a 15,610 hectare state development area in the Scenic Rim Region.

The case would look at infrastructure planning, sequencing, prioritisation and capital investment around Bromelton, west of the Gold Coast.

There was also $25 million in the city deal for exploring options to deliver affordable housing for the Toowoomba Railway Parkland Priority Development Area.

Caboolture West also received further infrastructure support with $210 million to help establish a pilot growth area compact for the delivery of affordable housing.

Gold Coast projects were notably absent from the plans despite the region being a major part of regional growth and the Olympic Games.

The SEQ City Deal was supported by a $667.77 million investment from the Commonwealth, $618.78 million from the state and $501.62 from the SEQ Council of Mayors, plus $75 million from industry.

Federal minister for communications, urban Infrastructure, cities and the arts Paul Fletcher said they had been working on this deal for three years.

“With three quarters of the state’s population already living in south east Queensland, it is vital that we plan and invest in the urban and social infrastructure that this region requires to support sustainable growth over the coming decades,” Fletcher said.

“The investments that we are making through this deal, in partnership with the state and local governments, will leave a lasting legacy on the region by providing improved transport links, important community infrastructure, and high quality jobs across multiple sectors.”

Premier Annastacia Palaszczuk said the deal provided a whole range of incentives for transport, livability and business cases.

“This city deal is also really important because it is also a catalyst for the Olympic Games,” Palaszczuk said.

“Where we will see the Gabba completely rebuilt but right across from the Gabba of course is the Cross River Rail and the new interchange with the Brisbane Metro.”

Brisbane Lord Mayor Adrian Schrinner said the deal was a critical step towards ensuring the south-east corner can cater for a booming population.

“There might not have been a time in our region’s history when such co-operation has been so critically important,” Schrinner said.

“SEQ is experiencing significant population growth as more and more Australians discover our unmatched lifestyle and want to call our region home.”

“We’re also a decade away from the Brisbane 2032 Olympic and Paralympic Games which presents a unique chance to showcase our region to the world while establishing a legacy that can continue to deliver for the generations to come.”


The visa changes that may ease Australia’s skill shortages

Hans van Leeuwen Mar 22, 2022

London | Many Australian businesses grappling with shortfalls of skilled workers are pinning their hopes on the Australia-UK free trade agreement due to come into force later this year.

A survey of almost 300 businesses by the Australia-British Chamber of Commerce (ABCC) found that 87 per cent expected the FTA’s easing of visa rules in both countries would help drive their growth, and half were planning to hire staff using the new pathways.

Lendlease Australia chief executive Dale Connor told the Chamber that his company was “experiencing a real skills gap”, including a dearth of quantity surveyors and engineers.

“Anything that enables us to access a wider pool of capability without friction is very important,” he said.

Under the FTA, which was finalised in December, Australia-based companies will no longer have to prove they could not find a qualified Australian for a job before hiring a Brit, and vice versa for Britain-based companies.

Professionals sponsored by a company will be able to bring their families for four years instead of two.

Working holidaymakers can be up to 35-years-old (the previous limit was 30), can stay for three years instead of two, and no longer have to do rural work – allowing employers to fish from a wider and more experienced pool of potential recruits.

“Given we cannot find enough of the skills we need, and this is likely to continue for the foreseeable future … [this] will certainly help a lot,” Deloitte Australia chief executive Adam Powick told the Chamber.

Accenture Australia chief executive Pete Burns said his firm would now consider “a formalised rotation program for younger staff with the UK firm, to complement the already strong movement between the two countries”.

But the Brits will also be keen to poach skilled Australians, and can offer higher London salaries.

Daniel Hodson, who chairs a project on the future of the London as a financial centre, recently told a parliamentary inquiry that the working holiday visa changes were significant.

“I ran an exchange that had 1000 employees – mostly graduates. The average age was 29. It shows that 35 is actually quite important, certainly in City terms, in terms of employability,” he said.

At the same hearing, John Cooke from the lobby group TheCityUK said investors in either direction needed to move key staff into the market when they expanded and were often stymied by the visa system.

“It may be extremely difficult to get a visa to move the personnel or experts you actually need to make that investment operate,” he said, welcoming in particular the prospect of longer visas. “If those things can be guaranteed under a treaty commitment, that is good.”

In 2020, there was almost $135 billion of Australian capital invested in Britain, and 600 Australia-owned firms operating there. More than 1400 British companies operate in Australia.

In the ABCC’s survey, three-quarters of respondents said the FTA would benefit them, and 20 per cent said this impact would be “significant”.

Boosting investments

Besides being able to shift managers and skills around, there would be streamlined investment approval processes that would help fund managers and venture capitalists to invest across the Australia-UK border, and help companies to tap those funding sources.

“Investing in the development of new products will become more rewarding as we will be able to transfer IP swiftly between the two countries,” Laing O’Rourke’s group director of people and corporate affairs, Josh Murray, told the Chamber.

“UK developments in large construction off-site manufacturing, for example, may become more readily re-usable in Australia, so we can be even more agile and capital effective.”

Australia’s process of ratifying the FTA will be set back by the federal election, which will restart the clock on key aspects of the process.

Britain’s parliament is likely to start the final phase of its deliberations in May. Despite vocal criticism from Britain’s agricultural lobby, the deal looks set to win majority support from British MPs.

As with all FTAs, the changes might not be immediate: the two governments have given themselves up to five years to implement all the deal’s visa changes, although it is understood both governments are keen to move quickly.

The FTA is potentially less significant for Britain than for Australia, warned Minako Morita-Jaeger, policy research fellow at Sussex University’s UK Trade Policy Observatory.

“While the agreement did achieve comprehensive tariff elimination covering almost all products, the economic effects of this increased market access will be small – simply because Australia is not one of the UK’s major trade partners,” she wrote in a recent blog post.

The UKTPO estimated the deal would boost Britain’s GDP by between 0.05 and 0.07 per cent, similar to the British government estimate of 0.02 to 0.08 per cent by 2035.


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