It is often suggested that it’s a lot more difficult for people to buy their first property compared to many decades ago. It is true that property is a lot more expensive. However, I would like to suggest that in many respects, buying a property today is easier than it was many decades ago. 

I would like to start by highlighting the main advantages that property buyers enjoy today compared to many decades ago. I’ll address the affordability issues once I’ve done that. 

Abundant access to information, knowledge, strategies, advice and so forth

How do you get ahead financially? One solution is to get the best advice so that you make the most of your financial opportunities. Often people learn by trial and error, but that can be expensive and waste valuable time. You can fast track your financial success by learning the best way to use your money. 

There is an absolute abundance of information that is available on the internet. Most of it is accessible instantaneously at no cost. Blogs, forums, podcasts, books, websites, software and so on. It cannot be underestimated how valuable that is. 

I purchased my first property 25 years ago and no such information was available (the internet didn’t even exist… now I’m showing my age). There were a few books about property investing, but not many. The only way to learn about borrowing strategies was by meeting bank staff, but they weren’t particularly knowledgeable or helpful. Therefore, unless you knew a successful property investor, it was hard to access knowledge. 

Today, I can find out how best to save a deposit for a property and strategies to mitigate a low deposit. I can find out how to manufacture equity via renovations. I can learn what makes a property investment-grade. I can research specific properties and find out what they have sold for in the past i.e., historic growth rates. I can learn about borrowing strategies, how to increase borrowing capacity and a mortgage broker can compare 30+ lenders in seconds. 

As the saying goes, “knowledge is power”. 

Much higher borrowing capacity

Thirty to forty years ago, borrowing 3 times your gross income was seen as very high risk. Today, the banking regulator (APRA) classifies a high-risk borrower as anyone that borrows more than 6 times their gross income. That is, I have come across some investors that have borrowed 10+ times their income, although I would caution anyone against borrowing that much. Over-borrowing is very risky. Mortgages are a wonderful servant but a terrible master.  

Therefore, by this measure, borrowing capacity has increased by 2 to 3 times over the past few decades. 

The challenge is that there are more things to spend your money on today (you can literally buy anything in the world on the internet). That temptation didn’t exist 20-30 years ago. This means would-be property buyers must make sacrifices. If they want to buy a quality property, they’ll have to curtail their spending. You can’t always have your cake and eat it too. 

In addition, 30 years ago, it was not possible to borrow more than 80% of a property’s value. Today, owner-occupiers can borrow up to 95%. 

Higher earning capacity and more employment opportunities

The internet has made it very easy to connect with people around the world. This means people can explore a lot more job opportunities. In fact, given the increased acceptance of working from home, it is not even necessary for you to live in the same country as your employer. 

Whilst these advancements might make the job markets more competitive, for some occupations it opens (literally) a whole world of opportunities. Therefore, first-time property buyers can proactively explore many opportunities to increase their income, thereby increasing their borrowing capacity and purchasing power. <

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IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.