July 05, 2018
New research released today shows the traditional Australian dream of home ownership is becoming harder to achieve and Australians are having to evolve their expectations and their approach to adapt.
Mortgage Choice and CoreData’s new Evolving Great Australian Dream 2018 whitepaper reveals 86.2% of Australians say it is increasingly difficult for people to achieve the traditional Australian dream of buying a free-standing house.
The study also reveals a deep cultural connection to property and financial security, however nine in 10 prospective buyers said they feel it’s hard to get into the property market due to high property prices.
Affordability continues to be the key trigger for purchase. As such, Australians are adjusting their expectations, with seven in 10 Australians believing there is a need to reimagine a ‘new’ Australian dream that is more in line with reality.
Susan Mitchell, Chief Executive Officer, Mortgage Choice said, “Owning a property has long been a cornerstone of the Great Australian Dream. However, with the growth in house prices, especially in metropolitan areas, the dream is evolving to encompass options beyond the traditional freestanding home on a quarter-acre block”.
This year we saw shifting attitudes toward living in apartments, with 62% Australians saying an apartment doesn’t carry the same sense of home and permanency as a free-standing house (versus 75% in 2017).
“Over the last few years, we have seen a surge in the number of people embracing apartment living, especially in metro centres where significant lifestyle upgrades such as pools and gyms are on offer,” said Ms Mitchell.
“But while many Australians are happy with apartment living, the data continues to suggest others are only choosing apartments because they believe they can’t yet afford the traditional dream of a free-standing home”.
The whitepaper also revealed Australians are willing to compromise, with 89% saying they would move to a more affordable suburb; or move to a smaller property (77%).
Other ways Australians say they are securing property is by paying Lenders Mortgage Insurance (31%) and enlisting a guarantor (5%) for their home loan.
Ms Mitchell said the biggest hurdle home buyers face is saving a sufficient deposit that amounts to 20% of the purchase price, and this has been made even harder by strong property prices, which have outpaced wage growth over recent years.
“To put the challenge into perspective, today Australians need to save and sacrifice for many years to put down a deposit of $100,000 to secure a median priced home valued at $556,384. Not to mention the additional costs typically associated with property purchase such as stamp duty and legal fees”.
For buyers with less than a 20% deposit, the whitepaper provides insights on purchasing strategies such as Lenders Mortgage Insurance (LMI) or engaging a guarantor.
“LMI is a fairly small expense in the overall cost of purchasing a home and it does have the benefit of helping a buyer purchase a home with a smaller deposit, thereby allowing them to get onto the property ladder sooner rather than later.
“The whitepaper also reveals that some (4.9%) purchasers are successfully engaging guarantors to purchase. Bucking the trend are home buyers aged 29 years and below, of which 21.8% had someone go guarantor on their mortgage,” said Ms Mitchell.
Our study also asked Australians about the impact of rising interest rates predicted for 2019.
“While the official cash rate has remained on hold for almost two years, borrowers and prospective buyers should not take the current low-rate environment for granted.
“The RBA may have the official cash rate on hold but we are increasingly seeing lenders make small out of cycle rate increases due to a mix of factors including wholesale funding costs, macroprudential regulation changes and tightened lending policies”.
In fact, the whitepaper revealed that 28% of Australians saw a mortgage broker first when they purchased a home or investment property (up from 16% in 2017).
Younger Australians increased foot traffic to brokers by 30% this year with 44% of 25-45 year olds consulting a mortgage broker first when buying a property.
“In an increasingly complex lending environment, more home buyers are seeking the expertise of professional mortgage brokers first when they purchase a home or investment property, and this is likely to grow,” Ms Mitchell concluded.
