The emotional cost of buying your first home

A recent report has revealed that a significant percentage of Australia’s first home buyers (FHBs) are under financial and emotional stress, with some ‘losing hope altogether’, and others believing that seeking help from their family is a sign that they have ‘failed.’

The Genworth First Home Buyer Report for August 2021 was based on a survey of 2077 Prospective First Home Buyers and 1008 Recent First Home Buyers across Australia, including all capital cities and regional areas, between April and May 2021.

FOMO driving FHBs to desperation 

The Genworth report says that 91% of FHBs expect house prices to increase, with two in three thinking that now is a good time to buy. According to the report, 71.2% of FHBs admit that fear of missing out (FOMO) is strongly motivating them to buy their first property, up from 61.2% in 2020.

According to the Genworth report, FHBs are willing to compromise on their choice of property, with 77% believing that owning any kind of property matters more than owning their ‘dream’ or ‘ideal’ home or investment.

Genworth CEO, Pauline Blight-Johnston, described first home buyers as “doing everything within their power to avoid homeownership slipping through their fingers in a market where interest rates are low and prices are booming.” 

“It’s taking longer to save for a deposit with house prices increasing, and we are seeing more First Home Buyers circumvent that roadblock by seeking to enter the market with a lower deposit. First Home Buyers are also telling us they’re feeling financially stretched and almost six in 10 are losing hope altogether.”

First home deposits a challenge 

According to the report, 76% of first home buyers are targeting a deposit of less than 20%, and 56% are looking at a deposit of less than 15%. To put this in perspective, in 2019 40.7% of first home buyers planned for a deposit of 20% or more. 

This may be partly due to the challenge of saving up a deposit in an environment of high property values. According to the report, it is estimated that it takes around 18 years to save a 20% deposit for a median-valued house in Sydney, and around 12 years for a median-valued Sydney unit. In Melbourne, the report estimates that it takes around 14 years and 9 years, respectively, to save a 20% deposit for a median-valued house and unit.

Seeking support 

While four in five first home buyers with deposits of less than 20% are likely to use LMI to help them get a home loan, around one in seven are reportedly planning to bridge the deposit gap with a little help from the bank of mum and dad.

Of these first home buyers, more than eight in ten believe that their family will be happy to help. However, 63.4% of these first home buyers believe this is a sign that they have failed, and 58% say it has put a strain on their family relationships.

Ms Blight-Johnston said that while the bank of mum and dad is a viable pathway to home ownership, “it’s clear that taking this route can be fraught with emotional complications.”

Prospective first home buyers working out their mortgage budget can use an LMI Calculator to estimate how much extra they may need to pay upfront if their deposit is less than 20%. There are also a range of grants, incentives and other support available from the state and federal governments. Additionally, a mortgage broker can provide specific advice on buying your first property, from planning a mortgage budget to organising your paperwork.

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