Is moving home the shortcut to getting into the property market?

Is moving home the shortcut to getting into the property market?

With the property market going from strength to strength, many first-home buyers are looking for novel ways to save up a deposit and get into the market, including moving back home with the parents.

The December 2020 median prices in Wollongong were $830,000 for a house and $599,000 for a strata property (apartment, unit, townhouse). Assuming you need to have a deposit of at least 20% of a property’s purchase price, both scenarios put the required deposit at more than $100,000. Faced with a decade or more of trying to save, the option to move home to cut costs and save more is tempting. Should you? There are a few questions to weigh up. The first is about the numbers.

Do you save that much?

We’ve done some rough calculations to see how much you could save. We took average weekly household expenditure data from moneysmart.gov.au and adjusted for inflation using the Reserve Bank of Australia inflation calculator. That tells us a lone person aged under 35 spends $915 a week. For a younger couple, that’s $1695 a week. Here’s what’s included in the expenditure list:

• Housing
• Fuel and power
• Food and drink
• Clothing and footwear
• Medical and health expenses
• Alcohol
• Transport
• Recreation

Remember, these are averages for Australia. Those figures underestimate rent or possibly assumes that you’re splitting the rent with someone. For example, in the Wollongong City area, the median rent for the March 2021 quarter was $410 for a flat or unit, to $550 for a house. But it gives us a starting point. You move home, and straight away, you’re saving on housing, fuel and power, to the tune of about $330 a week. Put that money away, and you’re saving $17,160 a year or a hefty $85,800 over five years.

Research by finder.com.au put the figure at $402 a week, meaning you could save $106,354 over five years. We’re a little cautious with our numbers because we’re not sure the parents will pay all your bills. All of this means that moving back home would get you into the housing market in just five years, and you don’t have to skip your daily coffees.

Will you actually save?

Those numbers sound great, but it all relies on one critical point: you have to save the extra cash. Too often, extra disposable income just means additional discretionary spending. There’s an age-old but well-proven economic law that says that as our income rises, so does our spending on luxury items. In other words: the more you have, the more you’re likely to spend. That applies to upgrades too. You need a new laptop or something you deem necessary, and with the extra money in your pocket, your price range jumps up to the model with a few extra bells and whistles. Humans aren’t very good at conceptualising big proportions. A few hundred dollars extra on a purchase when your savings goal is tens of thousands doesn’t seem like a big deal. But increased spending here and there adds up, and three years into your plan, and you realise you’re not saving near enough to reach your goal. So, be honest with yourself. Will you save the money, or will the extra cash mainly support a more expensive lifestyle?

Can you put up with being under your parents’ roof again?

We’ve dealt with the money questions, now let’s talk relationships. We’re going to assume you have a pretty good relationship with your parents, and it’s possible to move home and have some sort of privacy and independence. But you’re still at home, and will being at home make you feel like a teenager again? Remember the inquisitions: where are you going, who are you with, when will you be home? It can be easy for old routines and habits to re-emerge, to the annoyance of all concerned.

Then there’s your parent or parents’ lifestyle. Maybe they’ve moved on to and have been loving the empty nest. Dad swans about the house in his speedos, and mum is enjoying having friends around regularly. Would they be willing to curtail their lifestyle to accommodate you? And if you have a partner, you obviously need a bit of space and privacy for yourselves.

While the maths could make sense, perhaps the real question is whether the financial benefits outweigh the costs to your relationships and the psychological effects of moving back home.