When it comes to affordability in property, the needle has MOVED in the past few years, and the price of entry for just about any style of property, whether you are buying or renting has risen dramatically – resulting in not just less choice, but often no choice for those at the lower end of the ladder.
Taking Cairns as an example, 5 years ago (even 3 years ago, really), a typical, reasonably modern 2 bedroom, 1 or 2 bathroom unit in a lot of suburbs would have rented for somewhere in the $300 - $325 per week range. The starting point today for that same unit is now $425 per week and can rise rapidly from there.
Buying that same unit? I’ve seen like for like examples of the $250,000 that owned it in early 2020 now looking more like $350,000. The high $300,000 to low $400,000 houses of 2019 (and the preceding decade) are now more likely to be a $500,000 buy in.
Wage growth has unfortunately not followed inflation and the earnings of a buyer in 2020 are likely very similar today, making that 20-30% uplift in cost (depending on whether you are buying or renting) an increase in real, not just relative terms.
For those that bought in early, then they’ve had the opportunity to benefit from the growth along the way, with increased equity and an easier path to still upgrade from one home to the next. For those starting out though, there can be a real challenge. Short of finding a time machine, what can you do about it if you are looking to make those first steps?
If renting, unfortunately there is not much that can be done about affordability, but there are two things that will give you a leg up. One – be upfront with the landlord or property manager if its your first time. Offer some background (where appropriate) about why you would make a good tenant. Two – you’re probably going to need to team up on this one so make sure you have a good think about who you can live with, not just hang out with before you make a commitment!
When buying, take advantage of government assistance such as the deposit guarantee scheme and don’t be afraid to take small steps. Your first home is rarely your dream home but just getting into the market is the best way of eventually getting there. Not only will you be able to move sooner, but with a more manageable mortgage and more opportunities to value-add, there are real opportunities for those ready to put in the effort.