When the chips are down, confidence drops too. When it comes to homebuyer confidence, the chips seem to be on a decidedly downward trajectory – thanks to underemployment and a rising cost of living.
The Genworth Homebuyer Confidence Index saw a 1.6 point drop from 92.4% in September 2013 to 90.8% in March 2014 – a drop Genworth blames on cost of living pressures, underemployment issues, and a significant decline in first home buyer confidence.
Genworth pointed to mortgage stress as a source of declining confidence. Mortgage stress is the term that is generally applied to homeowners who put more than one third of their income towards their mortgage.
Genworth Australia’s chief commercial officer, Bridget Sakr, said, “The high cost of living has remained the number one cause of mortgage stress for homeowners since September 2011.”
The survey of more than 2000 consumers showed that 49% of current homeowners cite the rising cost of living as their biggest worry, compared to 25% of first home buyers.
The biggest stress for first home buyers was in fact, underemployment, with 63% of first home buyers citing concerns around underemployment as their biggest worry, compared to 32% of current homeowners.
Struggling to save for a deposit
Saving for a deposit seems to be another big issue for first home buyers. “While 71% of first home buyers consider the dream of home ownership to be realistic, this group continues to struggle to save for a deposit,” Sakr said.
First home buyer confidence dropped from 85.0 in September to 82.3 in March – partly due to underemployment concerns, and partly due the decreased affordability of housing (and therefore, the decreased affordability of a deposit).
Sixty per cent of survey respondents said it would take them four years to save for a 20% deposit, while around 30% said it take them more than four years.
One option suggested by iBuyNew is to buy off-the-plan property. While you still need to put down a deposit, you are essentially securing the property at today’s price, not the price it will be when the property has been finished. With property prices steadily increasing, this could be a great way to save money.
You may save even more money if you buy in the early stages of development when developers are often keen to make sales. Buying off-the-plan can also give you more time to save, and more time to shop around for a mortgage.
Doing it tough
The survey also showed that older generations think first home buyers have it tougher now than they did buying a house twenty or thirty years ago.
“Nearly two thirds of all borrowers believe that today’s first home buyers will have a tougher time getting into the market than the previous generation did,” Sakr said.
Homeowners also said they would be willing to help their children buy property, however, far fewer said they could actually afford to do so.
Eighty-six per cent of Baby Boomers, 89% of Generation X and 90% of Generation Y said they would be willing to help out, however, only 37% of Baby Boomers and 40% of Generation X felt they were in a financial position to do so.
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