How Can Savings Keep up with Property Prices?

I am a young guy aspiring to buy an investment property and I am saving up for a deposit using term deposits and I am told that you need 10% for a deposit but the problem is that property prices keep going up and my savings cannot keep up.

Keeping the money in term deposits is obviously not a good idea because property in the last year went up about 20% but term deposit only gives you about 6% so is there a way I can get exposure to residential real estate prices using small amounts of money?

My parents have a $600,000 house and I am thinking of buying small chunks of it. For example, one month I can buy the backyard, the next month I buy the toilet, etc. But my parents criticized me and told me that conveyance fees would be so high. I would need to buy heaps at once for it to be worth it.

If only some company had some financial security linked to the price of land. I'm sure they'd make a lot of money.

How can my savings keep up with property prices?
 
How can my savings keep up with property prices?

How can the required deposit on properties continue to outstrip the savings ability of potential owners?

Decades ago my brother was in Canberra during the Whitlam boom. As fast as he saved, the deposit expanded beyond his reach so he tapped the family, a kindly aunt mainly, and bought. Over fifteen years later he sold at a loss.

Sometimes doing nothing is the best thing to do. Just live within your means and an opportunity will present itself.
 
i remember in 2000 I was 15, and I was working long hours whilst at school. I was saving pretty good amounts of $$, say $400pw and as I was saving the house prices were going up faster then I could save. This was a boom, I couldnt buy anything till I was 18 ( i was being optimistic) however, a boom passed and I was 18. I purchased multiple properties since then and continue to do so all the time. It is still possible to start, you just need to set up an appropiate structure to do so, so you can keep expanding. If you cant find a fourleaf clover in your backyard, look in someone elses yard. When you find it, who cares, its still a four leaf clover :)
 
How can my savings keep up with property prices?

Become a tightarse like myself! Jks.

Well im one who thinks of ways how i can save on every cent for example something simple like $2 per month in bank fees over x amount of years will equal too thousands of wasted dollars, so i opend up an savings account which attracts no fees whatsoever. Same with my home loan no fees whatsoever attached. Some may laugh at this but everything like this adds up in the end. Think like this with most things and you might be suprised how much more you can end up saving in a few months.
 
Where there's a will there's a way.
We were all faced with the same dilemma many time in our lives, bottom line the choices are:
Do Nothing vs Do Something
If you do nothing guess what will happen?
If you do something that gets you started towards saving, earning more etc then something may happen, which may lead to other things happeneing.
You can't rely on the 6% from your term deposit, you gotta keep earning & saving.
give yourslef a $$ amount your going to need, and work out a timeline for getting there.

Also as Nathan says, you need not look only in your back yard, there's plenty other places to buy RE.
Once you have the means, opportunities will allways abound.
 
Also as Nathan says, you need not look only in your back yard, there's plenty other places to buy RE.
Once you have the means, opportunities will allways abound.

Exactly! So, you can't afford the $600k house. Well, maybe you might have to buy a unit, or a smaller house, or a house in a different area.
 
Exactly! So, you can't afford the $600k house. Well, maybe you might have to buy a unit, or a smaller house, or a house in a different area.

Exactly. I keep hearing about this latest 2009 boom. At this stage it appears to be centered around capital cities. So check out some regional areas.
Our area ( Shoalhaven NSW) has been flat since 05 and i cant see it booming for a few years yet so on average we are 25% off peak values cpi adjusted.It will boom again but for now places like this offer buying oportunities.The lates FHB activity resulted in a higher turnover but values did not increase that much.This could be said for many regional cities.Sure places like Sydney etc are expieriencing growth faster than you can save so buy elswhere and ride the inevitable ripple that it creates.
 
ROFLMAO!

Sorry, I just thought the idea of buying parts of a property, like you describes, absolutely hilarious. So if you bought the toilet, could you charge rent for it's use? :D

Seriously though you have been given lots of good advice. I know the feeling of never being able to catch up, I used to have it before I purchased my PPOR. Sometimes you have to lower your expectations. It amazes me that everyone seems to think they should be able to have the big house straight away - it doesn't work that way. For what it is worth, I still cann't afford the $600k house. I have a PPOR valued at $380k and am building an IP for $420k, but won't be able to afford the $600k PPOR for another couple of years yet - so I make do with what I can afford now.

It isn't just the deposit that is an issue, it is servicability as well. Would the bank give you that much money? if they would, then IMHO, you should be able to save the deposit.

Think of it like buying a car. Can you afford to buy a ferrari? Most people cann't. So what can you afford to buy? It might be a commodore. Or it might not even be that, it might be a little old shitbox '77 model mitsubishi galant. You have to make choices. You could buy the galant and then as you save more money trade up for a better car, so on and so forth until you get your ferrari - you might not be driving that ferrari for a long time, but you will still be driving. Or You can just sit there and save until you can afford to buy the ferrari, you might be retired by then, but you will still own it. Or you can just sit there spend your money on other things, not save, never drive and lament the fact you cann't afford a car - because it is not the car you want to buy.

The other thing to keep in mind it that as life goes on our situations change. M
 
This is the same problem every young person/couple have faced since forever.

The answer is to just work hard at saving and secondly (maybe most importantly) is not to expect your first home to be a $600K place.

You start with a crappy little fibro place or a small apartment in an old block.

Trade it up or buy a second one and rent the first out.

Do something different and speculate on land durin g a boom or build a project home during a boom.

Families often help out but don't expect them to help out for a $600K place. They would be happier to help you into a $200K place that is within your means and of a starter standard I suspect. Thats how I imagine helping my daughters when the time comes.

Don't expect this to be easy. Nothing worth having is easy.
 
Just buy cheap. Our 3 cost $25k (+ reno) , $65k (+ reno) and the new one will cost $100k + $10k in fees for the land. Turns out the rent on the first two will pay for all three with a lot leftover and if we did it again the rent on the first 3 would have the first one paid off in under a year. Positive gearing is a good thing :)

Same with my home loan no fees whatsoever attached.
How'd you manage that? :eek:
 
If only some company had some financial security linked to the price of land. I'm sure they'd make a lot of money.

Like a Listed Property Trust for example?

If you can't buy a whole property why not buy a small share of a range of properties? Not every investment has to be in property. Plenty of people have done well investing in good quality shares building up their equity so they can then buy into the property market.

Better long term gains than having your savings sitting in a bank account. :cool:
 
If only some company had some financial security linked to the price of land. I'm sure they'd make a lot of money.

As Gools stated - listed and unlisted property trusts (REIT) may be the go.

Some of them hold some impressive land banks.

Also, if you feel buying land/developing is the way to make money, you might consider (thinking out of the box) buying shares in a developer (eg Mirvac, Australand, Multiplex, Becton etc).

Cheers,

The Y-man
 
If you need more money then work some more hours, the more you work the less you spend and the more you will have.
That is how I looked at it and so thats what I did and the time I was 27 I stopped working.
But it also comes down to your own circumstances, you may have kids you may not, you may have a girl freind or wife you may not.
I worked any hours I wanted to work, so it was monday to friday start at anytime 5am 6am 7am work to 5pm or 11pm then I had the weekend off and was able to see my girlfreind.
I turned down work every weekend so I kinda lost thousands but Iam not a machine and I had to have a life.
so do what suits your needs.
 
My parents have a $600,000 house and I am thinking of buying small chunks of it. For example, one month I can buy the backyard, the next month I buy the toilet, etc. But my parents criticized me and told me that conveyance fees would be so high. I would need to buy heaps at once for it to be worth it.

How can my savings keep up with property prices?

Are you planning on buying your parents house? What's going on here, i don't quite get it!

In a few months i'll be buying my first dingy house, i have a nice deposit saved and with FHOG it's easy. Perhaps you're not saving enough? Or you're aiming too high. First house, like cars don't need to be nice, they just need to do the job.

$600k is a lot for a first house, especially if you're so young. I'd suggest getting something smaller, that you can afford pay off and rent out easily (if this is what you wish to do).

You need to go through your finances and see how much you can afford and what you can afford, do a little more searching, it'll be worth it in the end. You'll look back at this post and realise you had nothing to stress over in the first place :)

If you cant find a fourleaf clover in your backyard, look in someone elses yard. When you find it, who cares, its still a four leaf clover :)

Well said!
 
If you're parents trust you with the hemlock, take a joint tenancy with them on their 600k house, or source a new property, and then pay your share on vendor terms (for the 600k home) to them, or the bank loan itself (on something new) and then buy them out gradually once you've bought your share outright.

Personally I've never liked intra-family arrangements. Too much chance of excommunication type feuds. If they'll help you out with small risk to them then see previous advice on buying small and go from there.
 
Can I ask how old you are? Just trying to get an idea of how 'young' you are.

I refer to myself as 'young' - I am 27yrs. But then there are many members on somersoft here who are a lot younger. I have noticed that as I get older, things that had previously seemed unattainable are suddenly within grasp and I question how I never saw it before. But then 5yrs use to feel like forever - now I tend to plan things in five yr blocks ans worry it isn't long enough - part of that may be having kids who grow way too quickly. ;)
 
"But my parents criticized me and told me that conveyance fees would be so high."

There are alot of other reasons why this plan wouldn't and couldn't work - conveyencing fees would be the least of your problems.

Whilst you are saving you could use your time productively and learn everything you can about property. No point rushing in and making a mistake in your haste.
 
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