Sarah Bonnici and Nathan Hill have traded backpacking for buying a home. Picture: Brett Costello
The travel bug has bitten many Millennials, but COVID-19 slammed the breaks on their globetrotting ways.
During the international travel ban, instead of lamenting their lack of Instagrammable holidays, some savvy young buyers have traded Bali for budgeting in order to get their first leg on the property ladder.
ING’s Future Focus: Homeownership Report, published at the height of the pandemic in Australia, showed that to reach their property goals 59 per cent of Millennials said they were redirecting their travel savings. With 36 per cent revealing they were moving in with their parents to minimise spending. A total of 35 per cent said they would also forgo future overseas holidays to buy their first property.
A shift of priorities
Jet-setting has long been a top priority for young Australians. Prior to the pandemic, a 2018 Nielsen Poll revealed that 21 per cent of 18 to 24 year olds spent $2000 to $5000 on their summer holidays, compared with just 8 per cent of 45 to 64 year olds.
A Roy Morgan study from the same year showed that approximately 3.54 million Millennials had intended to take a significant holiday in 2019. And back in 2017, a Budget Direct survey reported that almost a third of 18 to 24 year olds with savings plans said they were prioritising travel over a house deposit.
Fast-forward to today and a global health crisis may have turned those behaviours on their head.
From holidays planning to home buying. Picture: Istock
According to realestate.com.au, first-home buyer search activity had surged by July, even though Australia’s COVID infection numbers were still a serious concern at the time. Comparing June 2020 to June 2019, the portal saw enquiry in Sydney was up 45 per cent year on year.
Domenic Nesci, co-founder of Wealthi, a real estate investment platform, said cancelled travel plans could be transferred into a one way ticket to wealth.
“2020 has been a great year to sit back, reflect and contemplate many things,” he said.
“The lockdowns forced many people to realise just how much money they can save by making slight lifestyle changes. Many have also realised just how possible it has become to get into property, with affordability improving thanks to lower interest rates and new government incentives.”
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Mr Nesci said Millennials might feel like there is no gain without pain when it comes to saving a home deposit, but added that the hard yards do not last forever.
“This is a big misconception, yet we believe that getting into property is the hardest part, especially if Millennials turn their home into an investment and utilise rentvesting. It’s always hard at the beginning, but it gets better, especially in low interest rate environments and in areas with strong population and rental demand,” he explained.
Low interest rates have made home ownership much more accessible for young buyers says Wealthi co-founder Domenic Nesci. Picture: Supplied
From backpacking to buying
Sarah Bonnici and Nathan Hill, 24 and 25-years-old, had grand plans to travel and work in Europe in 2020, but COVID-19 saw them grounded. Although the school teacher and professional golfer had funds saved up for a dream trip, they pivoted and decided to put that cash into their dream home instead.
“We couldn’t go away, so we decided to put that money into a house, we actually decided to build one,” Ms Bonnici said, admitting that they would have easily spent the house deposit on their international adventures.
“We thought let’s just build it, live in it for a while and in a couple of years if the world every goes back to normal then we could rent it out and move overseas then. At least that way we’ll be in front financially.”
Sarah Bonnici and Nathan Hill – from holidays to home ownership. Picture: Brett Costello
The pair worked with a Wealthi investment advisor, took advantage of first home buyer concessions and home builder grants, and were able to secure a house and land package in Spring Farm in Sydney’s south west which will be ready to move into mid next year.
“We’ve both got jobs out that way so we’ve decided to work on our careers for now and have some fun later and if we want to rent the home out we’ve learnt how to do that with Wealthi. There are a lot of options,” Ms Bonnici said.
Ms Bonnici’s advice to other Millennials whose plans may have taken an unexpected turn this year is to not be too sure of what’s around the corner.
“Always have second and third backup plans. Don’t be fixed on a five-year plan because you might finish it in three years, you never know what could happen,” she said.
“We didn’t get our trip, but we’re really excited that we’re going to be moving into a brand new home!”
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Every first-home buyer’s financial status is unique, but Mr Nesci said anyone looking to get a starter property in greater Sydney, such as an apartment or townhouse, would be looking around the $650,000 price bracket. He added that Millennials with job security and a good credit history could get into a property with a 10 per cent deposit.
Buying off the plan can give you more time to save your deposit. Picture: Toplace/Pemberton on the Park
“That’s anywhere from $50,000 to $100,000 and that’s before government incentives and home builder boosts. There are a few other ways that require five per cent, or even as little as zero dollars. Buying off-the-plan can also be a great way to save into a deposit, you can exchange on a contract with five per cent then you have one to two years to save whilst it is under construction,” he said.
Despite 2020 having been a year of extremes, and Australia entering it’s first recession in three decades, Mr Nesci said 2021 is shaping up to be a good time to purchase a property for those first-home buyers with all their financial ducks in a row.
“Interest rates have never been this low in Australia – ever. Government stimulus is significant and Australia seems like we are coming out of the COVID pandemic better placed than most other developed economies in the world,” he said.
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