A Millennial Approach To Home Ownership
The Sydney property market has been booming for over a decade now. Real estate prices have risen sharply. This has put a lot of strain on young people and families to achieve the dream of home ownership.
One of the biggest problems is coming up with the deposit. The reason for this is that you can only save so much. And, when prices rise quickly, you might struggle to keep up with your savings. Essentially, the deposit you need increases every year. As a result, the dream of owning a home you call your own moves ever further away.
These days many people are a lot older than their parents were, when they bought their first property. Understandably, younger generations are worried about this.
Usually young people tend to go to older generations in situations like this for advice. However, the millennial generation has started a trend that is showing some signs of success.
The Traditional Approach
This is how the road to owning a home used to work. You finished school, went to college and started a professional career. By your mid 20s you were earning a decent wage and you started saving some money for a house. Within a couple of years, you had enough saved for a deposit on a starter home.
Once you had a family, you started a plan to move into a suitable family home. Ideally in a nice neighbourhood with good schools. By that time your wages had increased, your starter home had gone up in value a little and you had saved a bit more.
However, this approach that worked so well for your parents’ generation is failing today.
The Challenge For Millenials And Families
Even professionals in good careers are struggling to save for a deposit. Many Sydney suburbs are now very unaffordable. With house prices over $1 million, you would need at least $50,000 for a 5% deposit. But in many cases banks require a 10% deposit which would mean $100,000.
Here is an example of the problem. A house worth $1m this year might require a $100,000 deposit. That same house is likely to increase in price to $1.1m in the next 12 to 18 months. That means you need $110,000 for a deposit. For many young people and families saving that much per year just isn’t possible.
Living costs are going up. Insurances are going up. Rents are going up. Healthcare costs are going up. And all this when salaries are barely keeping up.
A New Millennial Trend
With stagnant wages and increasing living costs, this looks like an unsolvable problem.
But more and more millennials have started to take a different approach. To counter the problem of wages not increasing enough, they have started their own businesses. Everything from plumbing to carpentry, and accounting to IT are seeing new companies started by young adults. And many of them are quite successful.
Owning your own business comes with uncertainties and risks. Millennials are very aware of that. However, when you offset the risk with a possible higher income, then that risk becomes acceptable. And when the dream of home ownership is not possible as a salaried employee, then that risk of uncertainty almost doesn’t matter.
It’s not just millennials that are taking this approach. People in their 30s and 40s are following suit. This is mainly the case for people with young families who want to move to a bigger house or nicer neighbourhood. They face the same struggles. And the income prospects of self-employment have become very appealing to them too.
It is not a revolutionary trend. When you think that prior to the industrial revolution, self-employment was more common than employment. Young people are essentially going back to traditions from several generations ago.
What This Means For The Sydney Property Market
If this trend continues, then several positives could result. Firstly, creating new businesses means that additional jobs are created. And job growth is never a bad thing for people’s lives and the wider economy.
Secondly, it will help younger generations to fulfil their dream of owning their own home. Just like their parents did before them. Increased home ownership brings an increased sense of security. Also a very positive impact for people’s lives.
New Buyers Will Enter The Market
Many young professionals, who currently cannot afford to buy, are stuck in rental properties. But with this shifting trend there could be a significant increase in buyers for this age group. And that could happen in just a couple of years, if this trend continues.
It will bring a lot more dynamic to the housing market for an age group that has largely been absent.
Strong Demand In Suburbs
Stronger demand in an already high priced market might bring about even higher prices. But that entirely depends on what parts of Sydney these buyers will target. It is probably less likely that they will focus on the already high priced inner Sydney areas. These would be the suburbs closest to the city; especially coastal ones.
With western suburbs being more affordable, young buyers are more likely to head out in that direction. For commuters into the city these are not ideal places to live. But if you own your business then you have great flexibility for where you are based.
Your Next Steps
If you are a millennial or just a recent new business owner, then you might be facing some tough decisions. All of a sudden home ownership is a real prospect. But where should you focus your attention? What kind of price range are you looking for? Where are the best schools? What is a fair price?
These are all tough questions. And you don’t want to waste your time and energy when we are here to help. As one of the leading Sydney buyers agents we specialise in advising you on just those questions. We can help you focus on the right areas that best suit your needs.
This frees you up to focus on your new business rather than the search for a suitable property. Contact us today to take the first steps towards getting into a new home that you can call your own.