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Has Generation Y been priced out of the property market?

Has Generation Y been priced out of the property market?

The Co-op ‘Future Leaders Index’ revealed earlier in 2013 that although Generation Y wishes to have their own home eventually, housing affordability is an issue to them. Of the approximately 2,000 respondents aged 17-29 years old, 80% said that the high cost of properties meant that it’s almost impossible for them to be mortgage-free.

So has Generation Y been priced out of the property market?

The answer has somewhat changed over the past few months, at least according to the Housing Affordability Sentiment Index (HASI). Based on the index, Generation Y has the most positive outlook on the issue of housing affordability among the respondents. Almost half of them expect their financial situation to improve over the next six months.

The positive outlook may have also been fueled by record-low interest rates. Since 2011, the Reserve Bank has continually cut cash rates, which eventually brought it down to the current 2.5%. Although analysts do not expect any further cuts but instead a rate hike on the first half of 2014, members of Generation Y still have enough time to enter the market.

There were also more members of Generation Y who owned both a home and an investment property. In 2013, 14% had both types of properties, a significant jump from 6% compared to the previous year.

Another factor that fuels the positive sentiment is the fact that more and more members of Generation Y are maturing in terms of age, as well as financial and professional stability. With stable jobs, more are able to afford homes or at least save up money for the deposit.

 Giving Gen Y-ers a Helping Hand

Aside from low interest rates and stable jobs, the government also has programs in place to help first-time homebuyers buy their first home. These include:

 1. First Home Owner Grant (FHOG).

Introduced in 1 July 2000, this is designed to provide additional funds to eligible first-time homebuyers to help them purchase a property. Specific features of the grant vary from state to state.

 2. First Home Saver Account (FHAS).

Saving up for a deposit can be difficult for people buying a home for the first time. Thus, the First Home Saver Account was created wherein the government will provide a 17% co-contribution of every dollar that a person saves in this account, up to $935.

Lenders too have somewhat loosened their requirements in terms of down payments. Some banks and non-bank lenders can offer up to 95-97% financing, granted that the applicant can demonstrate that they are financially secure and has a stable job.

The downside to this, however, is that the borrower will have to pay the Lenders Mortgage Insurance for financing that is over 80% of the purchase price of the property.

All in all, Generation Y hasn’t been completely priced out of the property market. In addition to their positive outlook on housing affordability, there are also options in place that will help make purchasing their first property a reality.

Speak with an expert if you need any assistance in the property market on (08) 9289 7777