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How the next generation of home buyers can enter the red-hot property market - avoiding FOMO



Quick stats:

  • 11% of first home buyers need more than 10 years to save a deposit.

  • In South Australia, the average first home buyer loan is currently $342,840 and the average first home buyer deposit is $85,710, This has seen a 8% increase since 2019.

Source: Finder, ABS loans data



The recently published Finder's First Home Buyers Report 2021 now estimates it takes some first-home buyers more than a decade to save the recommended 20 percent deposit.

Unfortunately for those looking to make their property debut, times (and prices) have certainly changed. Thirty years ago, Sydney's median property price was just $180,000. By 2020, the cost of the average dwelling has sought $870,000, totalling a price growth of almost 400% in that time.


In fact, the findings come as Australia's property market records its strongest rise in almost five years, and month on month, the price of a median Aussie home is rising at its fastest rate in 32 years.


Buyers experiencing a property "FOMO (fear of missing out) Crisis"

There’s no doubt about it; the Aussie dream is rapidly slipping away for some, and the real cost of the real estate boom is those who are now priced out of the market.


Not just a fear of missing out on canapes at a party, or that pair of shoes on sale, property FOMO is a thing for many young Aussies looking to take their next financial step in life. This is largely due to the rapid rate of absorption; keeping overall property inventory levels low and open-house inspection/auctions packed to the brim.


If you find yourself lucky enough to secure a contract for your dream property, the next hurdle to jump is your finance application. In 1995 the average mortgage was $46,000; now, the average is 12 times that, topping nearly half a million dollars.

What to do if you can't reach your deposit goal:

Because of this, many first home buyers are now looking to the bank of mum and dad to secure their first investment. Although cliché, using parents as added financial security is increasingly becoming the norm’.


Here’s why:

For the boomers that bought property decades ago, steady growth resulting in equity from these investments has afforded them the ability to purchase an investment property or give the children a foot in the door for those who didn't get into the housing market nice and early.


Finding a Guarantor:

To equip buyers with a decent deposit for today's market, they may need a guarantor. A guarantor provides additional security on a mortgage if you don't meet the full deposit requirements as a buyer. This works as a promise to the Lender that they will meet loan repayments and other obligations if the borrower fails to live up to their financial lenders' requirements.


How we can help:

Guarantors expose themselves to high financial risk for little/nothing in return. Because of this, most financial institutions require a guarantor to obtain independent legal advice before signing off on any loan documents, to ensure they have made a free and informed decision with respect to their impending obligations.

You can find more information on Guarantors here.


CPC Lawyers is one of the few law firms located in Adelaide that provide independent legal advice to parents, or anyone else, going guarantor for another. If you are seeking advice on Guarantor loan documents to secure a property or meet an upcoming settlement date, call (08) 7325 0219 to book an appointment today.



Disclamer:

The information provided on this website is general in nature only and does not constitute personal financial or legal advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.


Sources:

Finder, ABS loans data, 9 News Australia.