New vs old world: How has buying a home changed since your parents did it?

Article from realestate.com.au

Buying your first property has changed a lot in the past 30 years. Not only are house prices through the roof, but technology, lifestyle choices and steadily growing populations have meant the actual buying process is quite different to when our parents did it.

Once upon a time, the Australian dream was tied to real estate. The quarter-acre block in the suburbs, with enough room for the kids was the goal for most.

Now, with the population growing, along with the demand for housing in our cities, apartment living, share housing and renting are common alternatives. We’re living longer, and gravitating towards cities, meaning most markets remain highly competitive and very expensive.

“The average home for parents of millennials may have cost five times the annual income. Now the average home could cost 10 times the annual income,” Director of Melbourne-based buyers agency Master Advocates, Mark Errichiello, explains. “This compounds the stress and lifetime of loans and interest, and means that millennials need to adjust and break away from the dreams of the past.”

Many millennials are looking further out of the city to find their first home. Picture: Belle Co/Pexels

However, more than just the market has changed. Find out how everything, from property types to the home loan process has changed over the past 30 years.

The area you buy into

Rising house prices continue to push first-home buyers further from the city, depending on their needs. Fortunately, commuting isn’t as much of a hassle.

“Infrastructure is improving and suburbs are being developed further from inner metro areas, which means millennials can choose to buy more affordable housing between 20 to 40km from CBD and have access to employment via roads and highways and public transport,” Mark says.

What a typical suburban home may have looked like to your parents. Picture: realestate.com.au/buy

However, millennials still love inner-city living, which means first-home buyers are more likely to invest in outer suburbs or regional areas and continue to rent in the city or live at home, or they will compromise on the size of their home to keep the cost down and choose an inner-city townhouse over a suburban quarter-acre block.

The property type you go for

Twenty to 30 years ago, popular first homes included single-storey, brick or weatherboard, stand-alone homes, with three-bedrooms, one bathroom and a single garage.

According to the ING Millennial Homeownership Report, the dream hasn’t changed. Millennials still want the three-bedroom home, and they’re willing to look at less-established areas to make it happen.

Whether or not they’re actually buying these types of homes wasn’t confirmed. However, in Mark’s experience, millennials tend to seek smaller alternatives to crack the market, and might consider investing in a rental property before buying a permanent, family-style home.

Buying an apartment or unit might be a more viable investment for a first home buyer. Picture: Juhasz Imre/Pexels

“Millennials tend to look at low maintenance townhouses, units and apartments as initial first homes or investments,” Mark confirms. “This means they can still get into the market and, over a period of time, they will receive growth.”

The financial process you go through

Budgeting and saving is far more important for millennials, who are likely to end up in mortgage stress where the cost of their mortgage is more than 30% of their gross income. In short, house prices have increased, but salaries have not risen to match.

Having said that, millennials’ parents faced their own issues purchasing property in the 80s and 90s around the time of the last recession.

“During the recession, many families lost homes and businesses, and even though the cost of housing was cheaper, interest rates were high compared to household income and budgets,” Mark explains.

Now, interest rates are lower and, furthermore, it’s far easier for millennials to shop around for a good deal on a loan. There are more lenders, mortgage brokers and online tools to help make the process simpler, more accessible and easier to navigate.