Newspaper article The Northern Star (Lismore, Australia)

Short-Term Pain, Long-Term Gain; First Home Buying: Start Early and Reap the Benefits

Newspaper article The Northern Star (Lismore, Australia)

Short-Term Pain, Long-Term Gain; First Home Buying: Start Early and Reap the Benefits

Article excerpt

IT'S NOT uncommon to hear property owners and investors lament: aI wish I'd started younger,a and there's a message in this for young Australians who have not yet ventured into real estate.

The fact is, the greatest source of wealth for most Australians is their home. As I reported last week, the country's biggest mortgage broker, AFG, tells us first home buyers are back in the market where activity increased to 17.3% in July. But in reality, this is not a big number. It's my feeling that many young buyers are letting a golden opportunity pass them by in the 2012 market.

Right now, we're in a climate of falling interest rates where it's possible to lock in a fixed deal under 5.5%. In fact, with some lenders their variable rate is under 6% and this is pretty cheap money. Secondly, we're in a flat market due to poor confidence and prices have been quite soft. So as long as your job is secure, and you can afford the repayments with a decent buffer, this is an excellent time for first home buyers to buy while they can lock in these low rates.

In most cases, first home buying involves some short term sacrifice for the long term gain. The first property I bought was a run-down inner city terrace in Sydney for $96,000. I cleaned it up and rented it out for $100 per week. Even though it wasn't a palace, it was a lot nicer than the $40 a week studio I was living in, which was a real dump. But I chose to stay there for another two years to maximise my cash flow so I could get a foothold in the market. Looking back, I'm glad I made that sacrifice. A few years later, I sold it for $260,000.

While prices aren't rising as quickly today, most markets will still grow faster than you'll ever be able to save. Plus, the benefits of buying a quality property are magnified as time goes on. Not only will your capital growth boost your personal wealth, it will also create a source of equity that you can leverage later.

So in my view, the question for young Australians is not a[approximately]Should I get in?' but a[approximately]How can I get in?' There are lots of different avenues for first home buying, depending on your priorities and lifestyle choices. …

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