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How Long Does One (Really) Need?

How Long Does One (Really) Need?
May 17, 2024 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

Attitudes are more important than personal incomes and the price to purchase a standard house.

A few times every year, certain people feel compelled to write a ‘housing affordability’ report to point out that first home buyers need 8 to 10 years to save their deposit.

Many statements made in those stereotypical ‘housing affordability’ reports really grind my gears.

If it were true that everyone needs 8 to 10 years to save a deposit, it would also be true that everyone owned a home by age 30 (8 to 12 years after entering the workforce).

 

Deposit hurdle

Centuries of proof confirms that, regardless of what the specific challenges were in each era, if the individual’s ‘will’ was strong enough, they always found a way.

Throughout all of the last 70-years, 7 out of 10 Australian households owned their home (the other 3 households were rented).

It is misleading to base housing affordability on the time it takes to save a 20 percent deposit for a home.

It makes much more sense for an aspiring homeowner to take advantage of strategies to get into the market with a significantly smaller deposit.

Anyone who has been disciplined and lined their ducks up is eligible for traditional home loans with just a 5 percent deposit.

So, for anyone with some get-up-and-go, it does not need to take 8 to 10 years to make that happen.

Buying a property with less than a 20 percent deposit usually involves the bank having the mortgage insured. Paying the one-off mortgage insurance premium is usually a more intelligent choice than the alternative.

Some first home buyers are eligible for state and / or federal government packages for as little as 2 or 5 percent deposit (with no mortgage insurance cost).

The reality is, despite the daily blaming and complaining, there will always be a big critical mass of people who lack the personal drive, ambition and discipline to ever purchase real estate.

 

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A whopping 19 percent of existing Australian households have been in the workforce for 20-years or more and are yet to make their first step on the property ladder.

Depending on one’s individual career of choice, people finish school / university and will be working full time somewhere between age 17 and 24.

The principal occupant (tenant) of 242,000 homes rented in Australia were age 15 to 24 [Source: ABS, as at 2020]. It is totally understandable that they are yet to purchase real estate.

Similarly, it is no surprise at all that the biggest age bracket for Australia’s rental population is those aged 25 to 34 years.

But a 35-year old person has been in the workforce for somewhere between 9 and 18 years.

Of the 10.7 million total Australian households, the principal occupant for 1,943,000 million (19 percent) of them is a tenant who is 35-years of age or older.

Many of society’s serial blamers, complainers and Tall Poppy criticisers fit within the ‘green’ piece of pie in the above graphic.

As prominent American philosopher, Thomas Sowell, put it so eloquently: 

“I have never understood why it is ‘greedy’ to want to keep the money that you’ve earned, but not greedy to want to take somebody else’s money.”

 

Not ready to anchor roots

Plenty of tenants have consistently demonstrated financial discipline and might have a sizeable amount of savings and / or share portfolio. But have genuine reasons for not being ready to anchor down in a home that they own:

  • they may be ambitious and working in a role which requires a preparedness to move town every couple of years,
  • they may be in a relationship, but not quite ready to become joined at the hip with the long-term financial commitment of a mortgage, and
  • others are renting for a short chapter of their life while ‘transitioning’ out of divorce, domestic violence or the fatal loss of their partner.

 

One invariably finds whatever they look hard enough for

Desire to prioritise home ownership requires a certain minimum work ethic (a drive to earn enough) combined with the discipline to make sensible decisions with it (self-control with discretionary expenditure and a genuine preparedness to save).

1,074,202 Australians became first home buyers during the 10-years ending June 2023.

That’s a spectacular achievement for a country which took 230+ years to accumulating the current total housing stock of 11.2 million.

538,200 Australians under the age of 40 already own 1 or more investment properties.

That would suggest that there are other more pressing issues than the actual price of housing.

Attitude.

A heartstrings story of a wannabe first home buyer missing out on buying a $1.3 million property is little more than fake news.

Choosing to live in a particular location where the price of a home is significantly higher than elsewhere is not a reason for not being able to enter the property market. Australia is not a collection of communities divided by 3-metre high electric fences.

Every single year and in locations (literally) all over Australia, Propertyology buys dozens and dozens of low maintenance houses in locations with quality lifestyles and strong local economies, and we’ve rarely paid more than $700,000.

There are some intelligent, lateral thinkers who choose to rent a property which best suits their current lifestyle requirements while also exercising financial discipline, making their money work hard and investing in a property somewhere else in Australia.

 

Invest with the best: CONTACT PROPERTYOLOGY

 

RentVesting is an intelligent property ownership strategy adopted by approximately 100,000 Australians, most of whom would be in their 30’s (refer here for FAQs about RentVesting).

 

2-arms, 2-legs, 24-hours, 365-days

Everyone starts their day with the same core resources.

But it’s what one does with them that counts most. Attitude!

Theodore Roosevelt’s famous speech, ‘The Man in the Arena’, highlights the importance of societies being built by people from all walks of life who exercise courage, tenacity and skill… supporting people who are prepared to ‘enter the arena’, as opposed to those who sit watching from the sidelines, and often have the gall to criticise those ‘in the arena’.

Yes, getting the first foot on the property ladder is difficult. And there are genuine challenges right now.

But if you’re sitting back and waiting for the government to make it easy, you’re setting yourself up to spend the rest of your life as a ‘Leaner’ on the rest of society.

The official statistics confirm that, when it comes to housing, the only thing that governments truly ‘care about’ is the   $100 billion per year (and growing) that they charge in property-related taxes.

Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

Here’s how we combine our thought-leading research with Propertyology’s award-winning buyer’s agency services.

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