Average first home buyer in mid-30s? The Australian property dream could be your reality.
The average age of a first home buyer in Australia is now around 36 years old. So, if you haven’t stepped on the property ladder yet, you’re not alone!
Our parents and grandparents probably owned a home by the time they were 25. They also generally had a family and were in the career they would stay in for the rest of their lives. Today the world has changed.
Today, we’re getting married later, having children older, changing careers more often and buying our first homes much later. In fact, according to a recent global survey the average age of a first home buyer in Australia is now around 36 years old.
Why is this? What’s changed? And how can you fast track your own home ownership?
The Australian housing market in 2024
The Australian housing market has certainly changed over the last few years, and in the last 50. In the 1970s, the average age of the first-time home buyer was just over 25 years old. But today the average first home buyer in Australia is closer to 36 years old. This isn’t the only change. The number of first home buyers aged between 40 and 49 also rose by 63%.
What has caused this movement towards an older demographic?
Causes of the age shift
Property is very expensive. Today, across Australia, property tends to be quite expensive compared to annual income. In fact, house price-to-income ratio (or the median price of a home compared to the median household income) in Australia was 121.7 as of the third quarter of 2023. Worse, in 2022 research showed that Aussies had to use 41.4% of their income to make their mortgage repayments. Yet, the mortgage stress ceiling is generally considered to be 30%. This impact is felt even more in capital cities such as Sydney and Melbourne.
Rising interest rates.Consecutive rate hikes have impacted the average Australian’s ability to enter the housing market. These interest rate hikes decrease the borrowing capacity and increase the amount of interest buyers will pay over time. This means it takes longer to save a deposit and get on the property ladder.
Lenders are requiring larger deposits. Today it’s taking longer to save for a deposit. Of course this is partially due to the higher prices of property. But playing into this is the fact that lenders are requiring larger deposits now, generally 20% of the purchase price (excluding transaction costs such as solicitor and conveyancer fees, stamp duty and other charges).
Competition for homes has increased. We’re currently facing a shortage of available residences near jobs and services. One of the best ways to make housing more affordable is to build more homes where people want to live. Under the Housing Accord the Federal Government plans to construct one million new homes between 2024 and 2029, but until then, buyer demand in these key areas will continue to outstrip demand further driving up competition.
First home buyers want their dream home. Another factor that keeps first home buyers out of the market at younger ages is that they’re waiting for their dream home. Many Aussies are putting off marriage and partnership, studying longer and travelling more and essentially living ‘their best life’. When it comes time to buy a home they feel they’ve waited long enough and they deserve their forever home, rather than a smaller ‘starter’ home.
Each of these factors means that for many buyers it’s taking longer to save a deposit and find a ‘suitable’ property in a price bracket they can afford.
What are the implications of the older first home buyers demographic
One of the biggest challenges that older first home buyers will face is a narrowing mortgage window. An expert quoted in The Sydney Morning Herald has said that ‘Once you get to 45 or 50, lenders do want to know how the mortgage will be repaid’. They want to understand what your exit strategy is. This is because if you enter into a 30 year mortgage at the age or 45, you may be 75 before the loan is paid off. How will you repay the loan if you’ve already retired?
In general, lenders will not lend for loan terms that extend beyond the likely retirement age. This can make it tricky to find a lender when you’re pushing into the older age demographics.
How can you fast track your own home ownership?
If you’re heading into your mid-30s or even 40s and are keen to get into your first home, there are certainly some things you can do to own your own home sooner.
Watch your credit history. The longer your history, the more risk there is that you may miss a repayment over the years. It’s important that you make doubly sure your bills are paid on time.
Reduce your debts to less than one-third of your monthly income (including your potential mortgage).
Consider buying a starter home, or a home in a less than perfect area, even if it may not be your ultimate dream home. Compromises don’t always feel good, but they can eventually get you to the home of your dreams.
Consider the bank of mum and dad. Is your family happy to help you out with your deposit or perhaps offer a guarantee? If so, this can give you a leg up to own your own home sooner.
Have an exit strategy or solid repayment plan if your mortgage will extend past the age of retirement.
Get pre-approval. This will help you understand exactly how much a lender is willing to lend you and help you get into a good position to move quickly when you find the right home.
Use a mortgage broker. The advice and support of a mortgage broker – like our team – can help you find the right lender and the right mortgage for your circumstances. And that can see you owning your own home sooner!
Looking to buy your first home?
Are you a first-time buyer looking to hop onto the property ladder? Our team is ready to help you every step of the way. Get in touch today and let’s get started!