Homeownership: Keep the Dream Alive!
Australians have always aspired to have their own home. Once upon a time, the quarter-acre block was the dream. Or enough room for the kids to play cricket in the backyard and enough space to invite friends over for a good old BBQ. Today the family home looks very different. However, it is still a goal that many of us wish to achieve. With the recent spike in house prices over a good part of the country, the obvious question and much-discussed topic are that it is becoming harder for the dream of owning your own home to become a reality. Below are some of the reasons why.
1) Getting married later
If we are getting married, we are generally doing it later, with the average age moving from 21 to 28 over the last 40 years. Whilst wedding bells are only for some; this milestone is often associated with getting serious, which means starting careers and often a family.
2) How many times we upgrade our home or move homes
Typically, the younger age brackets (pre-children) are the most mobile. It is commonly thought that the average family that purchases will own four homes in their lifetime. I have often said to first homeowners over the years that the four home purchases they may make will be the following:
- First home: The entry-level home that will often not be great for a family, but it is a foothold in the market and will hopefully suit them for a season.
- Family home: This move may be to get closer to the right school. You may have outgrown the initial home by starting a family and wanting a home that will be suitable for a while
- The dream home: If financially you have the capacity to upgrade again, it will usually be to secure something that is what you always wanted. It may be closer to the water, on a larger block (such as acreage) or be nicer in terms of finish and living space.
- The home for retirement: Once kids are gone, we often want simpler, less housekeeping or gardening. Sometimes we move to be closer to kids, or we downsize to have a comfortable retirement choosing to travel over larger living spaces.
I am not saying that I recommend four homes in a lifetime. It is just something to take into consideration when making decisions. I mention this because it is quite expensive to sell than buy. So, if you can buy well and reduce one of these purchases, it will help you to become debt free earlier. The number of homes we live in over our lifetime has generally increased over the last 40 years, with many people back in 1980 only owning 1 or 2 homes in a lifetime. This change incurs more costs, such as stamp duty, engagement of real estate agents and solicitors and other costs, such as styling or renovating a home.
3) Mobility of the workforce
Over the past 40 years, we have also become more mobile as a society. I can think of one couple we have looked after for the last 15 years. Because of her journey as a young doctor wanting to have a career, she has moved location 3 times already and is still in her 30s. It has been common for people to move to cities for career and lifestyle reasons. If not thought through carefully, this can be pretty expensive, especially if it means purchasing a home each time.
4) Competition for spare cashflow
Over the last 40 years, some of the areas that we can tend to spend more than earlier generations are:
- Computers and technology
- Overseas travel. It was more expensive back then, which would cause many people to just holiday locally as they couldn’t afford it.
- Children. As parents, we often make decisions to give our kids more opportunities in life. We all love our kids and want the best for them, yet we need to be conscious of how we keep some balance here.
The University of Newcastle recently performed detailed research on financial well-being. Some of the conclusions they made were:
- If you are married or part of a couple, you have a lower chance of experiencing financial hardship. Marriage can also be seen as a decision to get serious and pay more attention to your finances.
- Even having children, more often than not, seems to have a positive effect on feeling good about your financial position.
- Owning a property means you are more likely to have financial autonomy, which generally means you feel more in control of your finances.
- Finally, whilst men tend to be more aspirational and have financial goals that they want to achieve, men tend to experience more financial hardship. With the help of a female though, who tend to experience hardship less, a good partnership may be formed.
So, what’s the moral of this story?
Whilst homeownership for parts of society is becoming more complex and slowly declining, the trend is gradual and still achievable. To achieve it, though, we need to:
- Be conscious of the changing trends
- Do our best to resist what the Jones are doing
- Come up with a plan
- Give permission to be held accountable (which will often be our partner initially)
- Kick those goals
At Vision, we are dedicated to helping our clients meet their financial goals. Whether that be to improve your financial well-being, achieve financial autonomy, or find a home ready to start a family in, we can guide you every step of the way. Contact us today!