The average home price in Melbourne is now more than $700,000. The other capital cities are pretty much the same. The Reserve Bank expects the Melbourne median price will be $1,000,000 by 2020, largely driven by surging population growth, a growing economy and rising incomes.
Many people have to earn more than $1.1 million of pre-tax income to buy a home costing $700,000 after tax. Most first homebuyers’ home loans take 25 years to pay off. $1.1 million is a lot of money and 25 years is a long time.
The position will be more difficult if the Reserve Bank predictions prove correct.
So, financial planning must be about strategies to make buying a home as achievable as possible. Some tried and tested strategies, discussed on the following pages, include:
- Negative gearing;
- Buying a house and sharing with friends;
- Co-owning with family;
- Co-owning with friends;
- Accessing a parental guarantee; and/or
- Buying purely as an investment.
Each of these strategies can make the task of buying and paying off a home that much easier. Financial advisers need to understand and be prepared to implement these strategies whenever the purchase of a home is a reality or an aspiration for their clients.
That is: most of the time.