Gen Y first-home buyers moving back in with their parents to save a deposit

by | Aug 15, 2016 | property

This article was first published by SAMANTHA LANDY, Property reporter, Sunday Herald Sun 

Image: Nathan and Tahnee lived with Nathan’s parents Wayne and Jayne Parle for 5 years so they could save money to buy a house. Picture: Jake Nowakowski


FIRST-home buyers are moving back in with their folks for up to six years to save for a deposit as real estate prices soar, a Sunday Herald Sun investigation found.


Buyers need almost $60,000 for the deposit, stamp duty and legal costs on a modest $400,000 home.


Only 23 Melbourne suburbs still have a median house price at this level.


An owner-occupier first-home buyer would need $90,000 to secure a house in Melbourne for $600,000 — the maximum first-time purchasers can spend for their stamp duty to be halved — and more than $127,000 to buy at the city’s median house price of $725,000.


And with interest rates slashed to a historic low this month, house prices are expected to continue to climb as investors and cashed up homeowners upgrade.


Nathan Parlby and new wife Tahnee Vincent lived with his parents in Croydon for six years to save a $20,000 deposit for their first home.


They’re “finally” moving out next month, having recently bought in Badger Creek, near Healesville, for $307,500.


Ms Vincent said they would have loved to have purchased in or near Croydon, but they couldn’t afford to.


The 26-year-old worked two jobs as a receptionist and a legal assistant, making about $50,000 a year, while her partner earned $60,000 as a golf course assistant superintendent to save for the deposit, and pay off their $30,000 wedding.


“We were able to put away roughly $1850 a fortnight, about one of our wages, as we were still paying board to Nathan’s parents,” Ms Vincent said.


“It was a lot of sacrifice. But it was definitely worth it.”


Tammy Barton, director of MyBudget, said that saving for a home was tough, particularly with current rental prices.


“It’s definitely hard to get ahead when the cost of rent chews up a large proportion of income,” she said.


“Young people and large families are especially disadvantaged. Young people are often on junior wages but pay the normal, market price for rent, while large families are competing for a smaller stock of suitable rental properties, which forces the price up.”


Experts say where there’s a will, there’s a way for young people to get a foothold in the Melbourne’s booming market. It just might mean “rentvesting” — buying an investment rather than a home for their first property — or living a long way from the CBD.


Advantage Property Consulting director Frank Valentic suggests targeting “ugly duckling” suburbs, such as Reservoir or Fawkner rather than fashionable Fitzroy, and houses in need of a renovation, as both were likely to attract fewer competing buyers.


He said first-time buyers shouldn’t be afraid to pay lenders mortgage insurance — a requirement for buyers with deposits under 20 per cent — as it could mean being able to enter the market faster.


According to yourmortgage.com.au, LMI for a $400,000 house costs about $6336 for a buyer with a 10 per cent deposit.


“House prices are going up faster than people can save. Rather than trying to catch a runaway train, LMI can also be a great way to get in,” he said.


REA chief economist Nerida Conisbee said low interest rates and better buyer education favoured Gen Y househunters: “But if I were a first-home buyer now, I doubt I’d able to enter the market.


“The price rises we’re seeing aren’t matched to the wage increase.”


Ms Conisbee said units and house-and-land packages offered affordability in Melbourne, but living in apartments or on the city fringe wasn’t for everyone.


Industry Insider Property Advocates director — and Gen Y property owner — Andrew Date said while it had always been the Great Australian Dream to buy a house, Melburnians were becoming open to apartment living because they could “afford them faster”.


“Buying a house within 10-15km of the CBD is near impossible without help from parents,” he said.


“My parents had an interest rate of 16 per cent in the late ‘80s. But right now, it’s definitely harder for young people to buy property.”


Baby Boomers Myrine and Alan Long worked two jobs each to earn the 20 per cent deposit for their first home — an $11,000 “shack with an outdoor dunny” on a dirt road in Belgrave they bought in 1973.


A few houses later, the couple now live in a townhouse in beachside Elwood and own four investment properties.


Mrs Long said she’d urged her Gen Y children to also aim low at the beginning of their property hunt.


“A lot of young people want too much too soon,” the property manager said.


“You need to work your way up. Move out of the city, save up, do some improvements to a house and when you can, move on to the next property.”


Mrs Long said suburbs like Werribee, Hoppers Crossing, Bayswater, Ferntree Gully and Bundoora still offered houses “young people could buy”. And if they didn’t want to live in the outer ring, they could always buy investment properties there and rent closer to the CBD.


Mrs Long did admit times had changed since she purchased her first house: “We started working fulltime at 17, a lot of people study now. We were married quite young. We didn’t travel.”