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Is Gen Z locked out of the housing market?


Is the Australian Housing Market Affordable for Gen Z?

Interest rates, inflation, and property prices have risen significantly. This has been widely reported in the media. As a result, many news outlets have started to refer to this as “locked out of the housing market”. This describes the difficulty younger generations, mainly generation z (often called ‘gen zers’) face when trying to buy a home or property. 

Regardless of these issues, being in your 20s is already composed of a multitude of stress – from work life, relationships with friends and family, and finding one’s purpose in life. This article explains why you should not be stressed about being “locked out of the housing market” and ways to overcome these issues. 

The Reality

Over the past year, the Reserve Bank of Australia (RBA) has increased the cash rate several times, resulting in higher mortgage repayments for borrowers. As of the 8th of March, 2023, the cash rate stands at 3.6%. Although this rate is significantly higher than the record-low cash rates seen in recent years, historical data indicates that it is a return to normal levels (refer to table below).

Graph of the Cash Rate Target

Since 1993, median house values have increased 412%, and the market shows no signs of slowing down, which is evident in the graph below:

National Median House and Unit Value

And, with inflation levels soaring at 7.8%, it is easy to see why many people are struggling to believe that Gen Z / Millennials can afford to enter the property market.

While the phrase is not inaccurate, there is a certain level of challenges working against our young people being able to enter the property market; we should remember that nothing in life is static. Everything around us is dynamic and constantly changing – and the property market, interest rates, and inflation levels are no different. 

Most of the time, change is out of our control, so like in any situation, we need to decide whether we will adapt and move forward or stay stagnant and get left behind. So, instead of feeding into the pessimistic narrative that the media pushes to cause societal stress and concern, we should focus on overcoming and adapting to this changing market.

Here are some of our tips for how you can work towards entering the property market:

Saving For a Deposit / Budgeting 

If you’re reading this blog, you have read at least ten others that have given you a list of ways to budget and hit that savings goal for a house deposit. So, in an attempt to not sound like a broken record, here are some other ways to save a bit of extra cash that you might not have thought of:

1. Minimise your Subscriptions

  • How many subscriptions do you pay for monthly, and how much does this put you out of pocket? Spotify, Apple Music, YouTube Premium, Netflix, Stan, Disney+, the list could go on, and the sum of these services could be putting you back quite a bit at the end of the month
  • Consider going in shares for subscriptions with family or friends. Consider whether you need 2-3 streaming services, or could you go with just one?

2. Savvy Travel 

  • Travel is viewed by many as an integral part of your 20s, and while older generations may tell you it is a waste of money, this is not true. 
  • One need not necessarily make a trade-off between travelling and saving, despite what some individuals may posit. Nonetheless, if an individual is aiming to become a property owner in the near future, it may be advisable to postpone indulging in lavish resorts and costly voyages until a later stage in life.
  • Instead, take advantage of your youth and travel to cheaper destinations, staying in low-cost accommodation, sticking to a budget, and booking in advance.
  • You don’t have to sacrifice your 20s in order to save for a house!

3. Avoid Buy now, Pay Later Schemes

  • It is advisable to refrain from utilising “buy now, pay later” facilities such as Afterpay and Zip Pay. It is likely that if one cannot afford a purchase at present, they will still be unable to afford it in the subsequent weeks.
  • These types of services can instil lousy spending habits. These habits could lead to the similar use of credit cards which can incur high-interest levels when payments are missed and negatively affect your credit score. 
  • Establishing a designated savings account in your budget, and making monthly contributions from your pay check, can be a wise approach. This account can be referred to as a ‘splurge’ account, and the balance in it should be considered your spending limit.”

4. Taking on an additional job or working extra hours

  • Do you find yourself with additional free time during the week? Due to the pandemic, a plethora of flexible employment opportunities have emerged, such as remote work and food delivery services. These occupations afford individuals the ability to dictate their schedules and select the hours during which they work.
  • Picking up extra work like this can be an easy way to make some extra money each week and put you ahead of others your age 

Taking advantage of government schemes

There are currently three government schemes for first home buyers: the first home Buyers’ assistant scheme, the first homeowner Grant (new home), and First home buyer Choice (property tax). These schemes were enacted to lower entry barriers for first-home buyers; as we all know, it is much harder to enter the market now than historically. The schemes offer an exemption on the transfer duty (stamp duty) payable when you purchase your first home, $10,000 towards buying or building your first home (as long as no one has lived in it before), or the choice to pay either the existing upfront transfer duty or an annual property tax.

Using Guarantor 

Guarantors can enable you to secure funding from a lender, as they provide additional security for the loan by using part of their home equity. Guarantors usually have to be an immediate family member such as a parent; if this is possible for you, it might be a worthwhile avenue to look into. 

Sacrificing Preferences

If you are serious about owning a property, you must be realistic and prepared to make sacrifices, especially in the current market. For example, being realistic might mean buying in areas further from the city. Remember that getting into the property market is the hardest step, and once this is taken, you can work towards getting that dream house or apartment in the city. Ultimately, the property market is a long-term venture, that you need to maintain a high level of patience with. Although Gen Z may face more challenges than previous generations in securing that first property in the market, we should not conclude that a whole generation is “locked out”, as there are many avenues individuals can take to overcome some of these issues. 

If you need help taking control of your finances to get into the property markets, reach out to us at Help My Wealth. We can guide you on your journey to getting the keys to your first home.

Is Gen Z locked out of the housing market?


Is the Australian Housing Market Affordable for Gen Z?



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