It’s a topic we’re all talking about – Australia’s rising cost of living. How do we live alongside it, and how can we make sure we’re still able to invest in a better future without spending beyond our stretched-out income in the meantime?
A rising cost of living shouldn’t put you off buying property altogether, because this simply isn’t the case. Although it is worth getting clued up on the realities of its impact on the housing market, understanding how it can affect your buying power and learning some ways to avoid its blows.
In this article, we’ll be exploring how Australia’s rising cost of living may affect your buyer’s budget, so you can enter the search for a property with the confidence and knowledge you need to get the most out of your money.
Get Your Ducks In A Row: The Importance of Financial Planning
Turbulent economic times create a perfect environment for ungrounded and uncertain budgeting. Without an in-depth understanding of the influencing factors on the Australian property market, it can feel like stabbing in the dark when deciding your buyer’s budget, or trying to gauge what it can get you. That’s why it’s a good idea to find a financial planner who can cut through the noise and provide you with honest advice and clear, essential information.
A financial planner will not only be able to explain market forecasts and predictions, they’ll be able to work with you to create a financial plan that ensures you find the right property that fits your criteria – not just one you can afford. Make use of their expertise and benefit from a point of contact you can rely on and work with as your financial situation or external economic factors change.
Understanding The Current Australian Economy
What’s causing the rising cost of living in Australia, anyway? In a globalised world, large-scale international events such as ongoing conflict in Europe, global supply chain issues, and even the knock-on effects of the COVID-19 pandemic are affecting the Australian economy.
These factors influence everything from the cost of groceries in the supermarket to hefty increases in mortgage interest rates. The cost of living is measured by comparing essential expenses (housing, rental and mortgage costs are included in this) alongside standard annual incomes.
For many Australians, these expenses are rising faster than their salaries, which is why you might find yourself with less left over at the end of each month – even if you haven’t been buying more than usual.
How Is This Affecting The Property Market?
Of course, looking to buy property is a much larger endeavour and financial commitment than comparing eyebrow-raising price tags on fruits in the fresh produce aisle. Some of the effects of Australia’s rising cost of living on the property market are hidden – and not always explicitly financial. Prospective homeowners may face greater challenges securing a mortgage due to changes in lending criteria, for example, or a reduced borrowing capacity.
As the relatively novel concept of working from home continues to destabilise the demand between city and rural dwelling, house prices, mortgage prices and interest rates continue to fluctuate, all presenting a property market that is slightly more unstable than we’ve seen in the past.
Explore Government Initiatives & First Home Buyer Schemes
The good news is that the federal budget released in May of this year showed an awareness of the situation, and the government has implemented new policies to tackle it. A $300 energy bill rebate is automatically being credited to each Australian household across the 2024/25 financial year, to ease some of the strain on meeting essential living costs.
Significant tax cuts have also been introduced for all taxpayers, with the intention for Australians to be left with larger amounts in their accounts to put towards housing investments.
Depending on where you’re based in the country, and your personal circumstances, you may be eligible for one of the many government grants, schemes or other financial assistance to help put more Australians on the property ladder. Benefits include shared equity through partial funding, property renovation grants and low deposit schemes that waive Lenders Mortgage Insurance.
A Practical Guide To Cut Back On Discretionary Spending
When putting together your buyer’s budget, you have to take the Goldilocks approach – which means deciding what you can sacrifice whilst being realistic. As pursestrings tighten, discretionary spending (which goes on dinners out, leisure activities and holidays) tends to be the first to suffer.
Australia’s rising cost of living means this has already been the case for many households. But if you’re serious about buying property, you have to get serious about cutting back your discretionary spending to make sure you’re making meaningful savings, especially as you approach the time when you’re preparing to pay your deposit.
That said, you’ll make saving a miserable experience if you simply cut out everything that brings you joy. So reduce, don’t eliminate your discretionary spending, and set budgets to ensure you’re spending within your means – whilst ensuring you can cover essential expenses and make meaningful contributions to your property pot each month.
An Australian Buyer’s Budget: Property Ownership Is Possible
Though buying property in Australia is not the easiest it’s ever been, market conditions are changing, with movement happening in a positive direction. With the right strategy and clever financial planning in place – it is possible to become an Australian homeowner without it costing you an arm and a leg.
Your buyer’s budget will likely be affected by the rising cost of living caused by global factors, which in turn is placing some stricter limitations on the property market and tighter restrictions on mortgage allowance. However, with a financial planner who can give you an expert insight, a disciplined approach to discretionary spending, and a finger on the pulse for government initiatives, you can not only grow your buyer’s budget, but make sure you get the most value from it.
