As property prices continue to rise in Australia, owning your own home has started to become a distant dream for many people- especially first home buyers. With Australia ranking the third least affordable country for housing in the world in 2018, the housing affordability crisis continues to be a significant problem. These days the average person is spending 13 times their annual income when purchasing a home. With the average mortgage costs hitting an all-time high there’s little wonder why many first home buyers are finding themselves priced out of the market.
So how can you still afford the Australian dream as a first home buyer? Well, it’s time to think small.
Small home designs are becoming increasingly popular among first home buyers for a number of reasons including the desire for smaller more manageable mortgages, reduced energy consumption, less maintenance and a lower environmental impact. Small homes are all about clever design and a conscious, deliberate use of space to create an affordable home that provides you with all of the features of a regular sized home- without the price tag.
So why are small homes perfect for first home buyers?
The equation is really quite simple. Having a smaller homes means smaller costs and a smaller environmental foot print. In addition to being kinder to the environment, there are also a number of other reasons why you should consider building a small home as a first home buyer-
- You will save money
Generally small home designs are less expensive and will have a smaller price tag compared to standard sized homes. This can mean the difference between living comfortably while continuing to save for your future or an investment property or being under a significant amount of stress worrying about an increase in interest rates. In general, less debt also means lower risk so banks are more likely to lend to you.
- You won’t need to save for years for a large deposit
Due to the affordable price of building a small home your deposit will be dramatically reduced! For example, the average Australian is spending an average of $650,000 on an existing or newly built home, which means you would need a deposit of $65,000 saved up before any financial institutions will consider lending you any money. This is in comparison to a small home that on average costs $250,000 which means you would only need a deposit of $25,000. Much more appealing!
- It is cheaper to build a small home rather than buy an existing home
Building a new home is generally seen as a more expensive exercise than purchasing an existing property on the market. However, that is not the case when you are able to build a smaller home. By building will have the advantage of building a home that has been specifically designed to suit your unique needs and incorporate space and features in an intelligent way. The overall cost of the build will also be reduced due to the smaller quantity of materials required and less resources needed.
- You can use your first home buyer grant
Most people have heard about the government’s first home buyer grant, which applies to homes that are purchased new or built. There are currently two First Home Buyer grants currently available from the NSW goverment.
Option 1- First home buyers building a new property are entitled to a $10,000 grant on homes worth up to $750,000.
Option 2- First home buyers purchasing a new property are entitled to a $10,000 grant on homes wrth up to $600,000.
Another great advantage of building a small home! For more information on the NSW Government’s First Home Buyers Grant.
- You will still be able to enjoy the lifestyle you desire
By building a small home you will ideally have more time and money to do the things you enjoy without the stress of having a crippling mortgage. You will also benefit from reduced maintenance and lower taxes and insurances which will allow for more financial freedom to travel, continue to save and enjoy the recreational activities you previously did before building a new home.
Whilst owning a large family home may be the dream for many Australians, thousands around the country are now electing to build smaller homes. So for first home buyers, small homes offer the prospect of buying and owning land sooner with less financial strain. By deciding to go small, this also gives first home buyers more financial freedom to travel, save and continue to live the lifestyle they desire.