What to do when your desired suburb is unaffordable
Are homes for sale in your ideal suburb constantly just out of your financial reach? Your savings are swelling, you’ve amassed enough for a deposit, but as soon as you’re ready to make a visit to your lender the homes for sale jump up in price. Again.
Unfortunately (or fortunately, if it makes you feel better), many aspiring first time buyers are in the same boat. According to CoreLogic RP Data, the combined median prices for real estate in Australia’s capital cities rose more than 11 per cent over the year to July 2015.
To put this in perspective, if you were eyeing up a home in your desired area a year ago that was $500,000, the price tag could now have inflated to over $555,000.
However, you shouldn’t let this act as a damper on your home ownership dream. If you find yourself priced out of your desired location, never fear as there are a number of ways you can break into the property market – all it takes is a little compromise. Here are some handy hints:
1. Rent in your ideal suburb
Unless you already do reside there, have you considered renting in your desired suburb? This can offer you the opportunity to get a feel for the area, and determine whether it really is the place where you’d like to own your home.
It’s one of the first things you should do, as it will ultimately allow you to make an informed decision on whether the price is justified.
2. Have a look at the surrounding suburbs
The Australian Securities and Investments Commission (ASIC) recommends widening your search to the surrounding suburbs. If the prices in the areas neighbouring your ideal location are increasing at a much slower rate, this can indicate heightened growth in the future, making for an effective investment!
For example, in September 2015 the Commonwealth Bank compiled a list of seven inner Melbourne suburbs with median house prices between $500,000 and $700,000, despite being surrounded by neighbourhoods nearing or exceeding $1 million.
3. Consider going smaller
If location is more important to you than the home, are you able to compromise and purchase a smaller property? If your answer is yes, ASIC suggests starting small before working your way up the ladder.
As your equity builds over time, you could refinance your home loan or sell your smaller property to purchase the home of your dreams. In fact, figures from the Australian Bureau of Statistics show that homeowners in our nation may already be following that advice. Refinancing was the key driver for growth in the owner occupier lending sector in the 12 months to July 2015, as it surged 23.7 per cent.
For the month of July 2015 alone, home loan refinancing was worth more than $6.2billion!
4. Buy an investment home
If you can’t afford a property in your ideal area, why not take a look at rental properties in other suburbs to invest in? Provided you choose the right home and property manager, you could receive a profitable income through rent payments and capital gains, allowing you to purchase your ideal home in the future.
In fact, the Genworth Homebuyers Confidence Index found that of 2026 respondents, 1240 owned their own home and/or an investment property, a number that has increasingly been swinging more towards property investment.
The Real Estate Institute of Australia’s President Neville Sanders also asserted the growth of investment.
“During the June quarter, the value of housing finance commitments from investors well exceeded the value of owner-occupier housing finance commitments excluding refinancing,” he said.