From eye-catching low-price guides to reduced borrowing capacity, in this article, we identify why the dream of home ownership is becoming increasingly unlikely for many, but more importantly how to fix it.
Websites such as Domain can be useful for navigating the current listings, but it’s easy to get carried away with reality. If you’re anything like me, all it takes is a second date and you’re already imagining what house you and that person you met at the Paddington Inn will live in together.
You select Tamarama & Bronte and set the minimum price to $12m, there’s 5 properties for sale, you’re not ready to wake up just yet! But as you imagine opening the sliding balcony door from the master bedroom leading to North facing panoramic views of the Pacific Ocean, this is when reality kicks in, and you return to your disgruntled ‘less than $1.5m price range’ and select ‘0’ parking spaces.
Borrowing Capacity
With everyone’s borrowing capacity reduced in response to the Reserve Bank of Australia‘s cash rate rise from 0.1% to a 12-year high of 4.35%, how can you compete with Sydney’s prestigious property market performing strongly? Everyone can borrow less, but the prices return to near-record levels placing the dream further out of reach. A higher base salary and clearing study loans and liabilities are too simple of an approach for this article, instead, we’ll briefly touch on certain types of income and why it’s important to know the best bank to maximize your borrowing capacity.
Bonus Income
If your income has a significant bonus portion and your most recent one was a record high it’s important to be familiar with banks that offer the latest year’s bonus in isolation, as many average out the 2-year bonus received, and others use the lower of the last 2 years. Hot tip, we can use 1 year bonus even if you’ve only had the job for 12 months.
Restricted Stock Units and Share Vesting
If you receive Restricted Stock Units (RSUs) as part of your employment it’s important to know what bank will allow you to use New Hire RSUs as the shares vest over a period of time. Each Bank’s assessment of this income type ranges drastically, so knowing the bank that suits the assessment of total shares granted and vesting schedule can be the difference between buying or reluctantly extending your recently increased rental lease.
Self Employed
With changes to income assessment for self-employed applicants, there are a number of banks allowing you to borrow based on your previous Financial Year’s performance in isolation. Was FY23 a big year for you? Get your returns done ASAP.
Low Price Guides
While not all real estate agents are guilty of low-price guides, there’s no denying this happens.
The best approach will be to seek out professional advice from a highly recommended Buyer’s Agent. With access to an array of off-market properties (more than 40% of their purchases are off-market properties), you’ll be presented with realistic options that your Buyer’s Agent can negotiate for you, saving the frustration and wasted Saturdays that come with unreasonably low price guides.
Conclusion
With intergenerational wealth transfers set to reach record highs, the affordability crisis isn’t going away. You may be sitting back relaxing if your parents own a home and you’re an only child (simple division theory), but regardless of what fortunes lie ahead the desire for a dream home is universal, as is wanting it now.
For those Beginning to Dream
onsider buying an investment property to get started. There are certain locations around Australia with houses that perform strongly even in a stagnant market. I’ve seen people with a 10% deposit double their equity within 12 months on countless occasions buying property in major cities outside of Sydney or regional locations around Australia.
Living in Bondi has its perks, but when you’ve been driving for more than 30 minutes looking for a park and you finally see one, only to realize it’s yet another driveway, perhaps it’s time to relocate and utilize the NSW Government’s First Home Guarantee Scheme. Buying for up to $900k with a 5% deposit would get your foot in the market (FYI you can get this in Bellevue Hill).
For the Experienced Dreamer
If you’ve saved enough to buy in the $1m+ range, or you’re looking to upgrade your home, multiple failed auction attempts can be debilitating, making the dream home appear unbearably elusive. I’ve seen clients who’ve been hopelessly looking for more than 12 months engage with a Buyer’s Agent and buy a home they love within 4 weeks! If this is you don’t hesitate to reach out and I can point you in the right direction of a trusted Buyer’s Agent.
For Everyone
If you’d like to know more about what bank is most suitable for your income type to see how real that dream might be, and what needs to be done to make it happen, feel free to get in contact
0438 693 821
