In a time where the cost of rent (and living in general) is increasing, South Australian households are tightening their belts. These six tips can help renters wanting to become homeowners save, budget and then choose the right home loan.
Did you know that Australian renters spend an average of 20 per cent of their income on housing costs? That’s compared to 15.5 per cent for homeowners. You can read more from the 2022 Rental Affordability Index report here.
For those creating a pros and cons list for renting or owning a home, that 4.5 per cent difference can seem somewhat disheartening. Especially when we consider the increasing median house price in Metro Adelaide, which shifted to $670,000 in December 2022.
So is the Australian dream of owning your own home still alive?
We think so.
But no matter which side of the fence you sit on, there’s good news for both homeowners and renters.
For those who enjoy the flexibility of renting, there is some relief in sight with the South Australian Government proposing changes to improve rental affordability. This includes banning rent bidding, private rental assistance and changes to tenancy bonds.
Those looking to enter the housing market should keep a watchful eye on housing projects set to launch across the state at Bowden, Playford and Prospect, in partnership with Renewal SA. Eligible residents will also be able to access homes within these projects as affordable rentals.
Every little bit helps, so here are a few tips for renters looking to become a homeowner.
1. Become best friends with your budget
Keeping track of where your money is going will help you set realistic savings goals. We’re not talking about cutting your morning coffee or weekly avo-on-toast. We’re not party-poopers.
However, keeping an eye on where your money is going, ditching unnecessary spending and reducing credit card debt can have a big, positive impact when you’re trying to get a loan.
Speaking of going out, you can listen to Matt Gilbertson talk all about having fun on episode one of the Hot Topics podcast. LISTEN HERE.
When assessing loan applications, lenders check your bank statements and credit history and look at your living costs and earnings.
Remember when your parents would activate extreme-cleaning mode before having guests over? The same principle applies here.
If you want some extra support with this, the ASIC’s Money Smart has a great budget planning tool.
2. Don’t be afraid to negotiate your rent
The Rental Affordability Index report says an acceptable amount of your income to spend on rent is 25 per cent or less.
Things like taking on gardening or other home maintenance responsibilities at your rental are ways you may be able to negotiate lower weekly prices.
Natalie Abbott, Principal of Property Management Adelaide, says if you do this, make sure it’s in writing so the property manager, landlord and tenant are all on the same page.
That snazzy budget of yours can also come in handy when negotiating rent.
Did you know you could be eligible for private rental assistance? HousingSA allows households with cash assets up to $62,150 to access the service. That’s more cash in your pocket.
3. Call in a friend
Getting a housemate to share the rent will allow you to free up additional money to save for a deposit.
You and your housemate save more and can end the days together chatting over a well-earned beverage. Win-win!
4. Do your research
Yes, that’s right, jump on the Google machine.
HomeStart’s Chief Executive Andrew Mills says not doing your research is the biggest pitfall when looking for a property to buy.
“Gaining as much knowledge as soon as possible about the purchasing process can help you avoid making costly mistakes,” Andrew says.
“Do your homework online, consult friends who have just purchased a property or join a seminar or two. The more you know, the smoother the process.”
HomeStart has free online tutorials to take you through each step, like the costs associated with buying and all the jargon lenders will throw at you.
5. Don’t sleep on the silent costs
Your deposit might seem like your biggest hurdle but there are associated costs you should be aware of.
Andrew says costs associated with stamp duty, government fees, conveyancing costs, loan establishment fees and building inspections are estimated by the RBA to account for about 6 per cent of the purchase price.
“Make sure you investigate the often-overlooked costs and weave them into your budget,” Andrew says.
“It is integral to also calculate the ongoing running costs of owning a property, such as council rates, repairs, depreciation, body corporate fees, water and insurance costs.”
Assistance with costs may be available for some HomeStart customers through its Starter Loan – a secondary loan taken out with a primary HomeStart loan to help cover the upfront costs for buying or building a home.
Assistance with costs may be available for some HomeStart customers through its Starter Loan – a secondary loan taken out with a primary HomeStart loan to help cover the upfront costs for buying or building a home.
6. Find the right home loan
Your bank account will shed a tear when it’s time to spend that chunky deposit, but having the right type of loan will make it easier to part with.
There are some initiatives that help South Australians at different income stages get into the housing market.
HomeSeeker SA is an affordable program helping singles with an annual income under $85,000 and couples or families earning under $110,000 find a home sooner.
“Carefully consider your priorities in a home, budget and finances, and seek advice to make informed decisions to avoid buyer’s remorse,” Andrew says.
