What would you do with $20,000
02 August 2016
If you were handed $20,000 in cash, how would you use it? That was the question put to 250 South Australian home buyers in our First Home Buyer Confidence Index.
This question was used to gauge the priority of home ownership for young people, and how easily it would be trumped by the appeal of competing lifestyle factors, such as going on holiday. Pleasingly, the results indicated that owning a home is still very important for young people, with more than half (51%) of first home buyers surveyed saying they would most likely put the $20,000 towards a house deposit. This was, by far, the top response, followed by using the cash to help with on-going household costs (16%), and further ahead of other options including buying a car, investing in education, paying off debt and going on a holiday.
Despite the commentary around millennials choosing to rent over buy, it is clear that purchasing a home remains an important goal for many young South Australians. The challenge for them begins, and often ends, with saving enough to cover the deposit and associated upfront costs. This isn’t surprising given most lenders require home buyers to have at least a 5% deposit saved to get started, as well as about the same amount again to meet other fees and charges. Additionally, having a deposit of less than 20% will most likely mean home buyers need to wear the costs of LMI.
When considering these combined costs, it becomes clear why getting a foot in the door to home ownership has become so difficult. While a $20,000 gift may not be on the cards, first home buyers should look into what home buyer grants or government assistance is available to them. Grants available for off-the-plan apartments and housing construction, which have the added bonus of stamp duty concessions, can help first home buyers to save more on upfront costs.
Additionally, South Australia is one of only two states with a government home ownership model like ours (Western Australia has KeyStart) that offers innovative home loan products such as low deposit loans, to assist home buyers get over the initial deposit hurdle and enter the property market sooner.
Home ownership will always be a challenging step for first home buyers, but it is promising that young South Australians recognise that buying a home is a significant step towards a secure financial future.