In the last decade masses of young Australians and millennials have given up the dream of ever owning their own home due to the unchecked growth of the real estate market. As of the 2016 Census, home ownership in Australia decreased even further to 65%, the lowest level in over 50 years. Even without a deposit for a home, there are ways to still participate in the property market and have your own version of the Great Australian Dream.
It might not be your dream suburb but our parents knew that they couldn’t start at the top. Outer suburbs are gaining popularity in recent times because of their affordability and rapid gentrification, lending them a more liveable quality that attracts a wider range of people- families, singles or otherwise. Due to the advent of technology, there seems to be increased, diversified working options, giving the opportunity to relocate for some and allowing people to choose where they would prefer to settle according to their tastes or wishes. Whether you desire a sea change that offers waterfront activities, or yearn for the pleasures only attainable through an environment nestled within nature, there are plentiful options now available that previously were out of reach because of locked job districts that have now been opened up due to technology. In addition to this, the ways in which to obtain a down payment on a property are becoming more accessible with choices that allow the owner to transfer the mortgage onto the interested party or find a property to rent-to-own. Sometimes the seller will let you negotiate a separate instalment plan to pay off the down payment- for instance, consistent payment on a monthly basis may be an option they are willing to consider. Other ways around this may include finding an investment partner who will put up some or all of the required cash in an equity-sharing partnership and in which you would split the final resale profits.
Rising in popularity are options such as peer-to-peer loans (P2P) and crowdfunding schemes which differ slightly. P2P involves investors lending money to borrowers with the cash secured against residential and commercial properties or new build developments. There are secured property lending platforms which offer this such as Landbay and Proplend, though many of them focus and bridging and development loans. Crowdfunding differs in that you can get a stake in a property and a return on the rental income and capital growth, rather than investing in a loan secured against a property. Websites which offer this are CrowdLords, Property Moose, Property Partner, The House Crowd and UOWN. If you are concerned that the property market will suffer a downturn, a good way to counter this is by picking properties that offer low loan to values so that your loan is more secure. Lenders in P2P are encouraged to spread their money across several loans and lending platforms to lower risks even more. It is a great way for amateur investors to get their foot in the door of the property sector.
Similarly, property funds allow you to invest your money into several properties and spread the risk across all of them, but if you prefer to stick to residential homes, your options are limited. There is also the option of investing in a Real Estate Investment Trust (REIT), where investors pool their money to invest in property so that they benefit from being closed-ended. This is particularly useful for those who wish to invest in less liquid asset classes such as properties. Online platforms including BrickX, CoVestaand Domacomhave also sprung up in order to support penetrating the property market. For instance, BrickX uses a selection of property professionals to select properties, with each being held in a separate unit trust. In order to build capital, each property is held for five years with monthly distributions received from investors from rental income after daily running costs are deducted.
With the changing nature of the property market and what it indicates for young people, many have plainly settled with the idea of choosing renting over owning properties. With rising prices, tighter lending restrictions, big upfront costs, the high costs of living and stagnated wage growth, it’s easy to see why this is the case. With changing priorities and a suitable lifestyle being at the forefront of this generation’s needs, the idea that homeownership is the culmination of an individual’s adult life is being kicked to the curb. With many foregoing mortgage repayments, renting provides flexibility and financial freedom for those who do not want to feel locked down- for instance, a renter being able to afford a home in the city in an area where a homeowner would be stretched for money. Investing in other assets apart from property may prove more fruitful, such as the stock market or small businesses, with some experts arguing that the stock market is more likely to increase you net worth. A survey collected by the Macarthur Foundation shows that 61 per cent of respondents believe renters can be just as successful as long as they invest money into where it can grow. With lower utility costs, a fixed rent amount and freedom from the worries of unstable property values, renting may very well be the way of the future for the modern masses.
The National Rental Affordability Scheme (NRAS) is a partnership between the Australian, state and territory governments to invest in affordable rental housing for low and moderate income earners. The scheme offers a ten year annual incentive structure with two key elements: one from the Commonwealth Government providing $8,335.75 per dwelling per year as a refundable tax offset or payment; and the other from the State or Territory Government at $2,778.58 per dwelling per year as financial support, indexed accordingly to the rental component of the CPI. These incentives allow people to rent dwellings at 80 per cent or less of the market value rent. These do not come under the term social housing but are rather private rental homes at affordable prices for struggling families and individuals. Approved participants are usually property developers, not-for-profit organisations and community housing providers with tenants generally tested against household income thresholds which may change slightly depending on the household composition.
Home ownership has always been a major factor in wealth creation for many individuals and will continue to be into the future, but despite this there are various other avenues of creating capital for oneself that do not involve entire property ownership. Getting your foot in the property market has become easier with the help of property funds and schemes such as P2P and crowdfunding. The increasing trend in renting has proven to be fertile if you are seeking out a more flexible lifestyle and discovering other assets in which to invest your money. Whatever your ambitions for the future, make sure to be clever and do your research so you can enjoy the pleasures of the housing you choose for yourself.