A survey conducted by Mortgage Choice of Future First Home-buyers revealed that an increasing number of first time home buyers are delaying buying their first home until later in life.
All of the 1,000 Australians who were evaluated in this study intend to purchase a home within the next two years. About 410 of these home buyers will be between the ages of 30 and 39 at the time of purchase. Another 390 will be between the ages of 18 and 29. Of the remaining 200 survey participants, 140 will be between the ages of 40 and 49 while 60 will be over the age of 50.
Compared to the results of the same survey conducted in 2011, the number of people aged 30 or older who are on the market for their first home has increased 7%, going from 54% in 2011 to 61%.
Saving Money is Harder
One possible explanation for the trend of buying homes later in life is that saving money has become increasingly difficult. The average first time home buyer now spends two years saving for a home instead of 1.8 years as reported in a previous survey. Over the course of these two years, the average home-buyer saves 26% of their monthly post-tax income.
Mortgage Spokesperson Belinda Williamson commented on the shift stating that an increasing number of home buyers may be delaying the purchase of their first home so that they have more time to save money. She also suggested that they may be spending more time researching a home and waiting until they achieve certain financial goals before buying a home.
The number of survey participants who reported job security as a major concern has surged while the number of respondents reporting fear over the rising cost of home ownership or interest rates has significantly lowered.
When asked about the most obstructive barriers to buying their first home, only 13 percent of respondents chose the rising costs of renting, while 20 percent noted rising home prices and 37 percent chose living costs.
Lack of Job Security
Nearly 20% of respondents reported experiencing fear over job security. This number made a huge jump from last year when only 11% of respondents reported job security fears.
Other concerns such as rising home costs and the effect of interest rates have gone down since the 2011 survey.
Belinda Williamson commented on the effect that an unsure job market is having on first time home buyers. She said that although there are several economic indicators including lower home prices and rate cuts, that should encourage people to buy, Australians are still nervous about their job security. She notes that although many people still want to own a home eventually, it is taking them more time to reach a point where they feel financially secure enough to make the purchase.
Why choose home ownership?
The most recent survey indicated that lifestyle factors are the driving force behind property decisions made by first time home buyers.
About 57% of first time home buyers report that their greatest motivator for buying a home is to establish long-term financial security by entering the property market. Nearly half of first time home buyers indicate that their motivation is to have a place to raise their family.
Avoiding rising rent costs is the third largest motivating factor for first time home ownership.
First time home buyers are doing their research and making more informed decisions about when to purchase a home. It is understandable that lifestyle choices and difficulty entering the property market would encourage more people to delay home ownership until later in life.
Additionally, this would suggest that younger Australians are delaying wealth accumulation until later in life.
A majority of Baby Boomers own their homes outright. They have worked hard, paid off their mortgage and for many; their home is their biggest asset. In fact, some business savvy Baby Boomers have borrowed against their home to invest in other properties. For many in this group, owning their home will offer some security when they retire.
On the other token, with more first time home buyers delaying home ownership until later in life, they may find it more difficult to set themselves up financially.
While it is true that they have more superannuation than their parents did, research suggests that the average worker will be unable to accrue sufficient super to have financial security in their lifetime.
The bottom line is that the rules of wealth creation remain the same. Spend less, save more then invest and reinvest until your asset base becomes sufficient.
By Jacob Pettit – Follow him on Google+