Top strategies to use if you're looking to buy property

For many, the property dream is now more of a nightmare. Australia has some of the highest house prices to income multipliers in the world. Sydney alone has seen an increase of 7.8 per cent (median value) over the past 12 months, with the house price median reaching over $1.6 million, according to Domain’s latest House Price Report.

With more people planning on calling Australia home, demand is predicted to continue to outstrip supply, meaning a competitive landscape for those wanting to purchase property. So, is home ownership realistic anymore? Maybe. Here are some strategies that can help you to get into the market.

Take emotions out of it

It’s easy to get frustrated about the headwinds faced by prospective home buyers today and think that the best time to buy was probably when you were still in nappies. Yes, it’s a very challenging market – especially for those who aren’t already in the market or don’t have the “bank of mum and dad” to fall back on.

Rather than lamenting what it is, get clear on what you can (or can’t) do in the current landscape.

Do you need to rentvest? That is, buy in an area with a lower price point and rent somewhere that suits your lifestyle. Do you need to buy in an area that you are unfamiliar with? Should you team up with a sibling or friend to get on the ladder together? Put all sensible options on the table for consideration.

Building your deposit

The biggest barrier most people face is having enough funds for a deposit. There are several ways you can buy without a full 20 per cent deposit. While this may mean you can buy property sooner, it may also mean you could have negative equity if there were a market retraction.

Banks can offer Lenders Mortgage Insurance (LMI) options for lower deposit amounts. LMI is insurance for the bank in case you default.

You may have a parent who would be willing to go guarantor using equity they have on their own property, or you may be able to access one of the government schemes. Remember, if you do have a lower deposit, it will mean you are borrowing more, which will mean higher monthly repayments.

Building enough cash for a deposit and any stamp duty costs takes years. Having a clear, consistent and automated savings plan is vital.

Create a buying brief

This is especially helpful if there is more than one person involved to make sure you are aligned or if you are the kind of person who suffers from indecision and or becomes overwhelmed.

This brief will help you get on the same page or have a really clear plan for what can be an emotionally taxing time. If you are using a buyer’s agent, they should be able to help you create and stress-test your plans.

Briefs should include what type of property you want to buy, your budget, preferred locations, “must-have” list, “nice-to-have” list, “immediate red flags” list, and any lifestyle considerations that are important to you.

If it’s an investment, also look at the demographic information, average rental income and vacancy rates, infrastructure plans and the main sources of employment for the area (if only one or two large companies employ most of the town, there can be risks if that employer moves out and makes a large proportion of the population redundant).

Research

Once you have your clear brief, then you want to stress-test it to see if your plans actually reflect the market. Find recent sales in your price range and in your preferred areas. If there aren’t any, it could be because the price you want to pay doesn’t match the market or because there have been very few sales recently.

From here, you can change your brief as needed. Sometimes, they need to be slightly tweaked; other times, they need a complete overhaul.

It’s fair to say very few people are getting the house-with-the-white-picket-fence of their dreams. Many are choosing to buy investment properties in areas with growth potential, moving to areas they would have never considered before or buying something smaller to live where they like.

Is home ownership harder than ever? Yes. Is it impossible? Maybe not.

Jessica Brady is a licensed financial adviser and runs affordable online money programs for people who want to learn how to be financially free.