COVID-19 has thwarted the property purchase plans of many first home buyers, a new survey found.
More than two thirds of first home buyers believe the pandemic has forced them to push back or give up buying a home, according to a poll of 700 from Gateway Bank. The survey was conducted in late May.
Just over half of first home buyers have delayed their home ownership plans, while another 16 per cent have put their plans on ice “indefinitely”.
First home buyers spend their home deposit savings
The research also found that half of Australian first home buyers have resorted to raiding their property deposit savings – money they may have spent years building up – to get by during COVID-19. One in six have nearly wiped out their deposit savings in this period.
The most common reason for first home buyers to dip into their deposit savings was to pay for everyday expenses, with 45 per cent saying this was what they used their funds for.
More than a third indicated they reallocating their deposit savings as their emergency fund, while 17 per cent accessed their funds to support a financially distressed family member.
Others used their deposit savings for:
- Stock market investments – 11 per cent
- Term deposit/high interest account – 11 per cent
- Travel – 10 per cent
- Buying/upgrading a motor vehicle – 10 per cent
- Upgrading rental accommodation – 6 per cent.
Nearly a quarter of first home buyers say they don’t intend to move their savings.
For the first home buyers who were forced to chip away at their deposit funds, it may take them longer to build up savings before their deposit is large enough to enter the housing market.
Almost 60 per cent estimate that they may need to save for an additional one to three years, while a quarter reckon they won’t be ready to put down a deposit for another three years.
Lexi Airey, Gateway Bank’s chief executive officer, said while many were accessing their home deposit savings during the pandemic, getting a foot on the property ladder is not completely out of reach.
“As more people are being forced to spend their deposit savings on basic living expenses, the prospect of buying a property is now even more elusive,” she said.
“However, the dream of home ownership remains alive for the vast majority of Australians, even if it is going to take longer to realise.”
One in five don’t know about government help for first home buyers
While savings timelines have been disrupted, the government has introduced various measures to help first home buyers get their foot on the property ladder. However, many were overlooking these schemes, the Gateway poll found.
More than one in five of those surveyed were unaware of any government financial assistance for first home buyers.
Meanwhile, 44 per cent had not heard of the First Home Owner Grants, which is a one-off state-funded grant to eligible first home buyers.
As few as a third knew about the First Home Loan Deposit Scheme, where first home buyers with a deposit of as little as 5 per cent may take out a mortgage without paying lender’s mortgage insurance (LMI).
About a quarter were aware of stamp duty concessions for first home buyers and the First Home Super Saver Scheme, which allows those who haven’t bought a property to save for a deposit within their superannuation fund.
Ms Airey said while some first home buyers are taking advantage of government financial assistance schemes, many were unaware of the help available to them.
“These schemes and other options such as LMI or a family guarantee are designed to help first home buyers purchase their property sooner,” she said.
“Awareness of these measures is generally quite low, and those looking to enter the property market for the first time could be missing out on an opportunity to put their pre-COVID home ownership plans back on track.”
Tips to help you save for a property deposit
1. Get on top of your debts
Debt can be a real financial burden, particularly when trying to come up with a sizeable deposit. While getting out debt can be tough, it’s not impossible. Consider focusing on your debt with the highest interest rate, as this is likely to be your most expensive debt. This may be your credit card debt, given that purchase rates can be as high as about 25 per cent on some cards. If you can smash a high-interest debt, you may well be on your way to a debt-free life. Another option is to consolidate your debts with a personal loan. This can help reduce the fees and interest you pay on multiple loans by rolling them into one personal loan, which some may also find to be more manageable.
2. Consider government help
If you’re seriously looking to buy a property but don’t know about the government first home buyer’s assistance schemes available, doing some research into this won’t hurt. Getting your foot on the property ladder is hard enough as it is without a raging pandemic, so it makes sense for you to take advantage of whatever help is available for you. Government assistance measures may come in the form of cash grants, mortgage assistance or stamp duty concessions and exemptions. Make sure you read up on the assistance available in your state and each scheme’s criteria to see if you’re eligible.
3. Open a term deposit account
While interest rates are on the decline, stashing your money away in a term deposit could be an option for those not wanting to risk their life savings on the stock market. Term deposits generally provide a fixed return on a set amount of money over a certain period. On the upside, you’ll know exactly how much you’ll earn over the term deposit period. However, it’s important to note that if you get in a situation where you need to access your term deposit funds, you’re likely to be charged a break fee from the bank. You may also miss out on some interest if you do take out your funds early. Make sure you weigh up the pros and cons of a term deposit before you sign up for one.