Why buying a house is different in today’s economy

Show notes

Kim Northwood is an Investor, Entrepreneur, and the Author of ‘Work Less, Make More: The Millennial Guide to Financial Freedom.’ Kim is passionate about educating people on their personal finances and understanding the risks of financial insecurity.

In this episode, Kim explains how buying a house is different to younger generations, and why these differences inspired him to write his book. He shares his biggest tips for saving a deposit in today’s economy and explores some unconventional ways to increase your savings that could help you secure your first property.

Transcript

Michael 0:00
The information contained in this podcast is general in nature and is not to be taken as financial or personal advice.

Michael 0:06
It does not consider your objectives, financial situation or needs.

Michael 0:10
You should consider whether this information is suitable for you and your personal circumstances before acting on it.

Michael 0:17
Hi and welcome to The Home Run, your guide to buying the first home in Australia.

Michael 0:21
On the show.

Michael 0:22
I’ll walk you through the home buying process from every angle we cover the steps to take the pitfalls to avoid and the answers to all your questions you’ve been dying to ask.

Michael 0:31
No matter what stage you’re at, you’ll learn everything you need to know about buying your first home.

Michael 0:35
I’m your host, Michael Nasser, and I’m a mortgage broker at Lendstreet, and I really love helping people buy their first home.

Michael 0:45
Kim Northwood is a Long-term investor entrepreneur and the author of Workless Make More The Millennial Guide to Financial Freedom.

Michael 0:54
Kim is passionate about teaching younger generations about the risk of financial insecurity and how to navigate unpredictable housing costs and the cost of living.

Michael 1:03
In this episode, Kim shares the differences between generations when it comes to buying a house.

Michael 1:09
Kim will also talk about the inspiration behind writing his recent book.

Michael 1:13
He’ll pass on his biggest tips for saving a deposit in today’s economy, and Kim will share some unconventional ways.

Michael 1:19
You could increase your savings to help you secure your first property.

Michael 1:23
Let’s dive in Kim.

Michael 1:28
Welcome to the show.

Kim 1:29
Thank you very much for having me.

Michael 1:30
You’re the author of The Millennials Guide to Financial Freedom.

Michael 1:34
But your background is quite different to that.

Michael 1:37
Can you tell us a little bit about your career before this book?

Kim 1:39
Yeah, absolutely.

Kim 1:40
So I had a 10-year career, actually working in foreign affairs and trade, and I have resigned recently from that.

Kim 1:47
So I spent 10 years as a trade negotiator and diplomat working out overseas, in places such as Afghanistan and Papua New Guinea, and that was working on economic development programmes, economic reporting, and other investment reporting in those countries.

Kim 2:02
I was also an advisor to Australia’s Trade and Investment Minister, and I did that for about a year and a half and then, in addition to that, I’ve also started a few companies, so I started a ski website back in 2010 and built that up over a number of years and then sold that to a New Zealand company in 2019.

Kim 2:20
And at the moment, I’m managing a a company that imports and distributes non-alcoholic beer.

Michael 2:26
Ok, that seems to be the trend these days.

Kim 2:28
Yeah, yeah, yeah.

Kim 2:29
So, no, it’s it’s going really well.

Kim 2:31
So probably seen it’s taken off in Australia in the last few years.

Kim 2:34
So we’re part of that, which is exciting.

Kim 2:36
And yeah.

Kim 2:36
And then, of course, the the author of Workless Make More The Millennials Guide to Financial Freedom.

Kim 2:41
It sort of wraps up my my experience in business and trade and economics and personal finance and investing kind of brings it all together in the book.

Michael 2:49
Yeah, obviously.

Michael 2:49
So you’ve got a few things happening here.

Michael 2:51
How did you get into the economic side of things?

Michael 2:53
Was that something from school and uni?

Michael 2:54
And you just sort of studied that or what happened there?

Michael 2:57
And how did you end up?

Michael 2:57
I guess being a trade diplomat because that isn’t something that everyone does very often.

Michael 3:01
And it’s a bit intriguing.

Kim 3:03
Yeah.

Kim 3:03
Yeah.

Kim 3:03
So, through uni, I, like, studied a bit.

Kim 3:05
And then once I started working with foreign affairs, I moved into the trade and economic side of things and then built up kind of expertise, you know, on the job, doing trade negotiations overseas.

Kim 3:16
And, you know, learning from all the great people around me

Michael 3:19
Can imagine there’d be some great minds there when you’re having those meetings and discussions and strategizing in those types of environment.

Kim 3:24
Yeah, yeah, yeah, yeah, yeah.

Kim 3:26
And you know, it’s it’s interesting because on the one hand, like I’ve been interested in personal finance, which is, interesting on in individual level.

Kim 3:33
And then you’ve got the big kind of macro side of things as well and how the money flows around and helps to make us all better off.

Kim 3:39
Hopefully.

Michael 3:40
Yeah, and obviously you’ve started some businesses on top of that.

Michael 3:43
So you’ve It’s really intertwining all those, I guess, skills and and those economic thoughts, whether it’s macro and micro and and everything in between.

Michael 3:50
So, I guess so.

Michael 3:51
After all of that, what led you to write a book about financial freedom?

Michael 3:54
You know your work less make more, you know, Millennials guide to financial freedom.

Michael 3:58
What was the motivation there and at what point did that trigger and yeah, tell us about that story.

Kim 4:03
I’ve always had an interest in personal financing investing, you know, for the last decade or so.

Kim 4:07
I’ve been, you know, really keen on, you know, learning more about it and investing and kind of building my own wealth through investing.

Kim 4:13
And the book came about because to me there was a gap in the market.

Kim 4:17
What I could see was that there were a lot of books for that really kind of basic first step level, you know, basic budgeting plans, that type of thing.

Kim 4:25
And then at the other end, you can go and see a financial advisor, and you can pay many thousands of dollars for that advice.

Kim 4:31
And that’s really great advice, and I do encourage people to do that, but it does cost a lot of money, and it’s not necessarily within the reach of everyone.

Kim 4:38
So I thought, you know, where is where is a book that kind of fits in that middle ground?

Kim 4:43
So it’s not the basic budgeting plan, but it’s not $5000 of financial advice.

Kim 4:48
It’s that kind of next level of financial information for people who are really interested, wanna learn more about it and kind of take the next step, in their personal finance investing journey.

Kim 4:57
That was one reason I saw that there were a lot of kind of mindset books out there.

Kim 5:02
You know, if you have the right mind, the wealth mindset, you’ll get rich.

Kim 5:05
And, you know, for me, I was like, OK, that’s great, But what do I actually do?

Kim 5:09
What are the actual kind of steps?

Kim 5:10
So I wanted a bit less of the mindset advice, and I wanted to kind of put down a bit more practical information.

Kim 5:16
You know, it’s very specific to the Australian context, the book that I’ve written, and that’s because it has to be because of all the various kind of schemes and rules and regulations they change from country to country.

Kim 5:26
So the mindset advice does work if you’re reading US Finance Book, for example, of course, that applies here.

Kim 5:31
But the actual kind of rules and regulations, methods, schemes are different and specific to Australia.

Kim 5:37
And then thirdly, I did want to respond to, you know, hustle culture that we have in Australia, where it’s the idea that you just have to kind of endlessly chase income more and more income is the way to get ahead.

Kim 5:48
And, you know, I was sitting there, I’d have chats with mates about all these kind of, like, hair brand ideas to get rich.

Kim 5:53
I don’t know if you ever watched Steinfeld, but, you know, Kramer’s, like, periscope idea.

Kim 5:58
Put that in the car so he could see over the traffic.

Michael 6:00
Yeah, yeah, yeah.

Michael 6:01
I, I haven’t seen all the episodes.

Michael 6:02
I haven’t caught that one.

Michael 6:03
I’ve seen a few, but definitely not.

Michael 6:04
Not that one.

Michael 6:04
But I can understand his personality and the nature of the show.

Michael 6:08
That doesn’t surprise me.

Kim 6:13
That he’d come up that you were just coming up with these crazy ideas to get rich, right? And then But then I would say, Oh, well, do you guys know about all the benefits you can get through your super fund, for example?

Kim 6:20
And they say no idea.

Kim 6:21
It’s this kind of like, really easy to access information that people didn’t necessarily know about.

Kim 6:27
So I wanted to write something that, you know, that responds to that and says, if you endlessly chase income you’re not actually gonna get ahead unless you know what to do with that money.

Kim 6:35
They’re really the main reasons that I wrote the book.

Michael 6:38
Yeah and as we’ve mentioned, the book is called Work Less, Make More, The Millennials Guide to Financial Freedom and one of the areas that you explore in the book is about how to buy your first home.

Michael 6:48
What makes it different for millennials or for younger generations today to buy a home compared to say what it was like for their parents or of different generations?

Michael 6:56
So what are those main challenges in particular and obviously with reference to what?

Michael 6:59
Who we speak to, through this podcast, it’s very much the first home buyer.

Michael 7:03
So how is it relative for them?

Kim 7:05
There are a number of different things that young people have to face today when they’re looking to buy a house.

Kim 7:10
Compared to older generations, you know, we’ve got salaries which aren’t really increasing in real terms.

Kim 7:16
Inflation is impacting on our purchasing power.

Kim 7:20
You know, we’ve got housing prices that were going through the roof during covid.

Kim 7:23
They sort of settled a bit that even now there’s signs I’ve just read today in Sydney that it’s picking up again and around the country, you know, we’ve got things like differences between gender earnings over a lifetime as well, which really does impact and rising costs to get the skills you need to get the high paying jobs.

Kim 7:41
So, you know, rising education costs.

Kim 7:43
So all all these are kind of increasing factors.

Kim 7:45
But, you know, for me, I think the kind of number one difference that I see between the millennial generation, those younger and the older generations is pretty much like the age at which people buy their first house.

Kim 7:57
So the research that I had for when I did my book was in 1981.

Kim 8:02
It was 24 was the average age of the first house, and now it’s risen up to about 33 34.

Kim 8:08
So you know, and all the research is saying that like far fewer people born after 1990 will own a house by the age of 40 compared to previous generations.

Kim 8:19
So you know, there’s kind of a structural shift happening here like it’s becoming much, much harder to raise a deposit to buy that first house, and that kind of has, like, impacts across not just your own life, but all of all of Australian society.

Kim 8:31
Really?

Kim 8:32
Because previously, if you think about it, you know, you could buy a house twenties, thirties.

Kim 8:36
You get a 30 year mortgage and you pay it off well before the time you retire.

Kim 8:40
Whereas now you’re buying your first house.

Kim 8:42
When you’re 40 you get a 30 year mortgage, it takes you to 70.

Kim 8:45
Well, that’s actually after some people retire.

Kim 8:49
So kind of has you have to start to think about like, What is that gonna look like in 30 years down the track for me?

Kim 8:55
If I’m buying a house later in life and so it does mean that you might have to look at things like dipping into super to pay off the house once you retire, it kind of has, like all these whole of life impacts, it is more difficult now for younger people to buy a house.

Michael 9:09
The one thing that we discuss with clients that are in that stage is how they buy their first house, too, because potentially, I guess the traditional dream was buy a house, start a family grow, and you know, and then you might buy an investment property.

Michael 9:21
But now we’ve got concepts like rent vesting where you know you’ll continually rent.

Michael 9:25
But you might buy in an area that you can afford so you can get into the market that way.

Michael 9:29
Potentially so.

Michael 9:30
There are different strategies, and we speak about that quite a bit throughout this podcast.

Michael 9:33
But that’s definitely the different strategies that do come to play, especially in the major cities Sydney, Melbourne, because the prices there are are obviously in comparison.

Michael 9:42
And I don’t know what it would have been like in in 1981 when people were buying at 24 their salary compared to the price of a house.

Michael 9:49
But I often hear it was quite common for a blue collar worker in those times to be able on one salary to afford a house and, you know, start a family and all that sort of stuff.

Michael 9:57
Whereas today that doesn’t seem to ring true as much, which is why these incentives and these super schemes and things like that can assist as well.

Kim 10:04
You know, the latest research I had was we’re up around 8.5 times the median to buy a house around Australia.

Kim 10:10
Previously, you know, back in 1990 it was four times.

Kim 10:13
It is just getting more difficult.

Kim 10:16
Another point I wanted to make here was, , just about renting and the fact that because it is getting so difficult, I do actually hear a lot of people starting to say things like, It’s so difficult.

Kim 10:25
I’ll never own a house.

Kim 10:26
I may as well just give up on that dream.

Kim 10:28
It’s out of my reach.

Kim 10:30
And, you know, I think it’s a very dangerous kind of attitude to take with the current state of the rules related to tenancy laws in Australia, because despite the fact that they are making some changes, I know New South Wales has just announced or had previously announced that they were gonna make changes but no fault evictions for periodic leases.

Kim 10:50
But it still doesn’t give you the kind of long-term security that you might see in other countries overseas.

Kim 10:55
You know, Germany, Europe, et cetera, where you can have these really long-term leases in Australia, you can still be kicked out if the landlord wants to move back in.

Kim 11:03
For example, you know there are a whole bunch of reasons that you can just be kicked out, and that’s fine when you’re young.

Kim 11:07
But you imagine when you’re old and someone just wants to kick you out of your house, you know, through no fault of your own, then that really does start to put you in a precarious situation.

Kim 11:15
So I, I say, like as tough as it is, I still think in Australia a house is kind of a cornerstone of financial security, and you should be looking at all these strategies that are available to look to buy a house.

Michael 11:27
Yeah, it’s it’s funny that you mentioned that the vulnerability of I guess being a renter and compared to the European countries, because in our last episode we had Doctor Nicola Powell, who’s the head of research at Domain and one of the topics we touched on in.

Michael 11:39
That was the concept that we may need to look at creating rules for having extended periods of rent.

Michael 11:44
So people that are renting have that security that they have because in Europe it’s quite common that you get a lot longer rental terms and there’s a lot more security in being a renter and people might have lived their whole in in a particular house renting, and they’ve had that peace of mind or that security, whereas with here it’s almost like it’s a six month or a 12 month and then you go month to month and then it’s like, you know, there’s a lot of uncertainty about that and, yeah, that’s something that we, we we touched on.

Michael 12:06
So it’s it’s interesting that you mentioned that as well.

Michael 12:08
Other than that, what do you see as the biggest challenges for this generation?

Michael 12:11
when trying to purchase their first home?

Kim 12:13
I mean, the biggest challenge really comes down to raising the deposit.

Kim 12:16
That’s really the most difficult thing, because prices are are increasing so much.

Kim 12:21
And typically people and banks want to encourage you to get a 20% deposit.

Kim 12:26
Just putting enough money aside to get a deposit is the number one challenge for first home buyers, in my opinion, and unfortunately, I think it’s gonna remain a challenge for a long, long time to come.

Kim 12:38
And as I said before, you know, with house prices so high compared to the median salary in Australia, that really is making it very challenging and, you know, we are seeing sort of some segmentation, I guess, across society, younger people, those who are lucky enough to have received some assistance from their parents and those who haven’t.

Kim 12:57
And that does kind of cause a bit of a schism because it means people who get that assistance can buy earlier.

Kim 13:02
So it is a it’s kind of a, you know, a broader problem that we have to tackle in Australia.

Kim 13:07
It is kind of that generational wealth divide is is increasing.

Michael 13:11
In a lot of the European markets, and property has been around for a lot longer than as we know it in Australia, I mean, and so as we evolve as a society and, you know, 100 years and 200 years pass and do you see that more happening?

Michael 13:23
That generational type of homeowners and landowners and that segregation occurring?

Michael 13:28
I know it’s probably a bit of a left field question, but do you see that increasing or have you have?

Michael 13:32
Do you have any thoughts on that?

Kim 13:33
I think what I would say is, if we don’t intervene and do something, then yes, that is kind of the natural course of events, you know, like capital does tend to accumulate with people who have capital already and wealth creates wealth.

Kim 13:48
So the answer to your question is yes.

Kim 13:50
I think that will happen as a natural course of events unless we do something.

Kim 13:54
So that’s all to say.

Kim 13:54
I don’t think it is inevitable, you know, As I said, society, we can put in place rules and, you know, have a schemes and things like that that make it fairer and give everyone kind of that fair go fair chance to buy a place.

Kim 14:06
But, you know, unless we do something about it, then yes, I think that is kind of a natural thing.

Kim 14:11
Capital will create capital.

Michael 14:15
And the role of government because in Sydney and Melbourne, I see a lot of guarantor type of loans.

Michael 14:18
You know, for first home buyers.

Michael 14:19
Now that probably is in line with the capital, you know, creates more capital concept, and the beneficiaries of that are people that already have the capital.

Michael 14:27
But I think what you’ve highlighted is the fact that and I think government has a bit of a role to play there where we’re creating incentives and schemes.

Michael 14:33
So people that don’t have that facility or or accessibility to guarantor loans or, you know, using you know, mum and Dad for that sort of scenario, which obviously is very much the case and totally fine, but to our people that don’t have that same opportunity to access something similar so that they can start their property journey as well.

Michael 14:51
Because I, I like you believe that property is a a cornerstone feature of wealth in in in Australia.

Michael 14:56
In any case, jumping back to the biggest challenge which you’ve mentioned, which is the deposit, which I feel is also the case.

Michael 15:03
It’s something that you touch on in the book.

Michael 15:05
So what’s your biggest tip for saving for a deposit in today’s economy?

Kim 15:09
My biggest kind of tip is that there is actually a lot of assistance available out there.

Kim 15:14
There are a lot of schemes there, but they can be confusing.

Kim 15:16
There’s a lot of information, and, you know you don’t necessarily know where to look.

Kim 15:20
So the number one tip, I think, is actually just to kind of start educating yourself about what assistance is available and not just sort of sit back and say, Oh, it’s it’s too hard, really kind of dive into to what strategies you might be able to employ to raise that deposit.

Kim 15:36
So we’ve got, you know, things like the First Homes a scheme, which is a scheme which allows you to put more money into your super fund.

Kim 15:43
Voluntary contributions, then allows you to take that money out and put it towards a a house deposit.

Kim 15:48
Doing that, you’ll get great tax breaks and really kind of boost your savings.

Kim 15:53
And I think you can take up up to $50,000.

Kim 15:56
So once you of additional contributions, the good thing about something like that is that it happens automatically behind your back.

Kim 16:02
So I’m a I’m a big fan of automatic savings.

Kim 16:04
I do find it hard to run a budget personally.

Kim 16:07
Other people love it, but I’ve always found that having a a system where you automatically save before you see the money for me works because then there’s no temptation to actually use that money.

Kim 16:18
So the first home saver scheme is one thing for people to look into.

Kim 16:21
First Home owner grants.

Kim 16:22
Now every state and territory in Australia now has first home owner grants you know, there are conditions in terms of income thresholds, property thresholds.

Kim 16:30
Sometimes you have to use it for a new build, for example, rather than an existing home.

Kim 16:34
But certainly they’re there, and they could be in the order of 10 to $15,000 which is, you know, that’s a very, very handy little boost to your savings.

Kim 16:43
And then you’ve got things like stamp duty concessions.

Kim 16:46
All Australian states and territories now have some sort of stamp duty concession for first home buyers.

Kim 16:52
And then again, there’s kind of different rules related to eligibility and house price thresholds.

Kim 16:57
But they are there, you know.

Kim 16:58
And then we’ve seen state governments kind of expanding the remit of those stamp duty concessions as well.

Kim 17:05
So do definitely make sure that you look into that when it comes to get the house.

Kim 17:09
And then you touched on this as well.

Kim 17:11
loan guarantee schemes.

Kim 17:12
Now, some people, of course, use parents or other family members as guarantors, But there is actually a a government system as well set up to do this.

Kim 17:23
There’s the first home guarantee scheme.

Kim 17:25
This can let you get a loan with a deposit of as little as 5% of the price.

Kim 17:31
I mean, that drastically reduces the amount that you would need to save for a deposit that’s through the federal government and then so there are caps in terms of the number of places each year on it, and there are caps in terms of kind of income thresholds.

Kim 17:44
But certainly it’s really something to have a look at because it it means that you can get that deposit, get that house with a much smaller deposit.

Kim 17:51
Of course, it does mean you’ve got to be very mindful of how much loan you’re servicing because now you’re servicing much more.

Kim 17:58
You haven’t managed to raise as much as bigger deposit, so that comes into your monthly budget after you get the house.

Kim 18:04
But in terms of raising the deposit, it’s a pretty handy scheme, you know, On top of that, all the states and territories have their own schemes as well, and this is where it gets a bit confusing.

Kim 18:14
And I say you’ve got to look into this and they’ve all got different names and they’re often quite similar.

Kim 18:17
Like first home buyer schemes.

Kim 18:19
Key start home start housing finance loan, Home buyer fund, but just to kind of run you through some of these very quickly.

Kim 18:25
West Australia has key start.

Kim 18:27
South Australia has home Start has the housing finance loan and the pathway shared.

Kim 18:32
There’s the Victoria’s Home Buyer Fund, Tasmania’s My Home, New South Wales, shared equity and ACT and Northern Territory schemes as well.

Kim 18:39
So with some of these schemes, some of them have a loan guarantee aspect.

Kim 18:43
But a lot of them also have what’s called a shared equity scheme, too.

Kim 18:47
And that means that the state government will take a portion of the equity over the house and it means that the total loan that you need again is lower.

Kim 18:59
They can be particularly good for people who are finding it quite difficult to save for that larger deposit.

Kim 19:05
And basically, it means you can get a place with an overall smaller loan, which means the deposit can be lower so you can get into these schemes with some of them are as low as 2% of the total value.

Kim 19:17
So it really is again, like a way to get into the market with a much, much smaller deposit.

Kim 19:22
Of course, with the shared equity scheme.

Kim 19:23
You have to be conscious that because the government is taking a portion, you don’t actually own the whole house.

Kim 19:29
There are often options at the end of the loan to pay out the government portion of it.

Kim 19:34
You know, it’s kind of just something to be mindful of that you’ll end up sharing the equity with the government.

Kim 19:38
It is a way to get in with a much smaller deposit.

Michael 19:41
And that’s obviously the aim of the aim of that particular question.

Michael 19:43
Is, is what is those opportunities and, definitely with the federal, you know, low deposit, you know, scheme with that 5% contribution.

Michael 19:50
In doing so, you save LMI, which is a big carrot of it at all, which is the lenders mortgage insurance component for deposits less than 20%.

Michael 19:57
Now I know with our probably our last 11th home buyer applications, about six or seven have have utilised that particular scheme, so that’s definitely one that’s out there and definitely being used and and that’s just rolled over over.

Michael 20:09
So yeah, there are limited numbers to that, and it just rolled over the It’s a financial sort of year calendar where it resets.

Michael 20:15
So obviously now, today is the 27th of July.

Michael 20:18
And, it reset earlier this month.

Michael 20:20
So that is definitely something that is being utilised, the shared equity.

Michael 20:23
I don’t see as much, but I can totally see how that could work as well.

Michael 20:26
But as we had mentioned earlier, a lot of these things unknown unknowns right now.

Michael 20:31
And I think we draw attention to them so people can investigate them and explore them and see for their scenario and their situation if it’s right for them, because it may offer, you know, a path to home ownership, which is obviously, in our case, what we’re trying to achieve for our clients and for anyone that’s interested.

Michael 20:45
Things like, side hustles and other unconventional solutions are becoming a lot more prevalent for younger generations.

Michael 20:51
So do you have any unconventional tips for saving some extra money?

Michael 20:54
Obviously, we’ve spoken about the schemes and the government incentives, but for the individual, you know, looking at creating a unique way, is there anything that you’ve seen or in your research or anything that you’ve seen sort of out and about?

Michael 21:05
Well, putting a book together that you can shed light on for us?

Kim 21:10
Ofcourse, like there’s a whole bunch of budgeting techniques I think that people can look at, you know, you can move into a share house, for example, look casual jobs.

Kim 21:17
Uber drivers eat in instead of going out, buy secondhand, use marketplace.

Kim 21:21
Which, by the way, I’ve just been selling a whole bunch of stuff over the last week.

Kim 21:24
It’s brilliant, like you’d be just so amazed what people buy, but, you know, domestic holidays instead of going overseas.

Kim 21:31
These are all kind of the budget hack side of things.

Kim 21:33
As I said before, I’ve never really been a big budget myself.

Kim 21:37
I don’t find that I can stick to it because expenses kind of come in unprepared.

Kim 21:43
So I’ve always been a really big fan of allocating savings first and then using the rest of the money to kind of pay for expenses as they come in and not touching the savings.

Kim 21:52
But in terms of like the more I wouldn’t say they’re unconventional, but they’re, I guess, less commonly used or known, even for people who are quite savvy with money.

Kim 22:02
But I really do think that it’s important to use your savings in a way that helps to keep up with the prices.

Kim 22:11
So budgeting hacks alone while they are good for saving, I think to really raise a deposit, which is quite a substantial amount of money.

Kim 22:18
I think you need your money working for you as well.

Kim 22:21
And that kind of means looking at investments for that for that money.

Kim 22:24
And so, depending on the the time frame for your money, money for your for raising a deposit, rather, you might look at sort of various strategies.

Kim 22:31
So I would say, at the very least, a very risk-averse strategy is to look at a term deposit for some money, and that way, when prices are going up, you know, So they got 5%.

Kim 22:40
If your money is going up 5% at least you’re kind of keeping up with it.

Kim 22:44
And you’re not having this situation where you’re saving and saving.

Kim 22:47
But the prices are running away from you.

Kim 22:49
So I was just looking before the sort of best-term deposits out there at the moment are up around five 5.3%.

Kim 22:55
At the moment.

Kim 22:56
There is another side to rising interest rates.

Kim 22:58
It does mean that, you know term deposits go up, so I think people should look at that and they could use a term deposit.

Kim 23:04
If it’s for a shorter time frame, they want to make sure the money is is safer and they’ll get that guaranteed return.

Kim 23:09
And at least that kind of gets their money working for them a little bit.

Kim 23:13
Get helping them to keep up.

Kim 23:14
Then if you’re looking at a longer time frame to raise a deposit and again, like people should do their own research on this, it’s very important because there are risks involved.

Kim 23:21
But getting into, you know, exchange-traded funds on the share market and putting your money somewhere where it can offer a return in terms of dividends and kind of capital appreciation over a longer time frame Again.

Kim 23:34
There are risks, of course, but over a long time frame that can help you keep up with the rising prices.

Kim 23:40
And it does mean that like you’re not just relying on your savings alone to raise that deposit.

Kim 23:46
You are getting that money working for you as well.

Kim 23:49
So and you know, for some people you could even look at like a real estate investment trust, for example, which actually gets you straight into the property market.

Kim 23:57
So for people who aren’t aware, they’re, you know, entities that own multiple kind of properties, usually that produce income and they’ll own a range of properties across Australia and including, you know, it could be like commercial properties could be residential aged care facilities, warehouses, hospitals, et cetera.

Kim 24:14
But it does actually mean that you own a slice of that straight away, and you can get into that relatively easily and with a you know, a very small amount of money.

Kim 24:22
And again that kind of like gets your money working for you and keeping up kind of with the general property market in Australia.

Kim 24:29
So I think that’s kind of the thing I’d really say is that savings and budget hacks and you know they’re all very important, And it is.

Kim 24:37
You can’t just kind of frivolously spend your money and expect to raise the deposit for a house.

Kim 24:40
By the same token, I really think it’s super super important for younger people to kind of understand the investment options that are out there and understand how the kind of the system is working so that they can keep up with the prices as they as they rise.

Kim 24:54
Because the fact of the matter is, particularly in a place like Sydney and through covid, prices were rising way faster than than anyone could save.

Michael 25:02
Yeah, totally.

Michael 25:03
And there are definitely, definitely a lot of factors for that as well that were pretty unique to the situation at that point in time.

Michael 25:09
Definitely, the low-interest rates and the high borrowing capacities, which are obviously no longer exists, did inflate that massively.

Michael 25:15
But I love the how you know you kind of touch on.

Michael 25:17
There are simple things that people do, which we all know about, which means, you know, which could be getting an extra job or or obviously saving, which you need to do, and being more diligent about that.

Michael 25:26
But I do like how there’s that extra layer of complexity there potentially for people to start to consider whether it’s the safer term deposits or those other methods of investing your money.

Michael 25:34
So you make your money work for you, and I think that’s definitely something that people should explore obviously with the right professional, you know, in mind and and your book will obviously go through things like that as well.

Michael 25:44
And we’ll discuss more about that in terms of how our listeners can get access to the book and sort of explore these ideas a little bit further.

Michael 25:51
But yeah, no, definitely great thoughts and tips there.

Michael 25:53
We always close our interviews with two questions, and we use the same two questions just to, you know, benchmark them and and sort of compare our responses across the episodes.

Michael 26:01
The first one is what would be your number one tip for a first home buyer trying to get in the market today be?

Kim 26:08
It’s very easy to kind of to say it’s all too hard and you hate the game and throw your hands up.

Kim 26:13
But there’s just no guarantee that laws in Australia will ever change to make renting for life a feasible option like it is potentially overseas.

Kim 26:21
Maybe it will happen.

Kim 26:23
Maybe it will.

Kim 26:23
Maybe there’ll be enough lobbying on certain politicians in the government for it to happen, but maybe it won’t.

Kim 26:28
So to me, it’s a very, very risky strategy to say.

Kim 26:31
I’m just gonna rent for life.

Kim 26:33
As you know, that is the kind of rules and regulations currently stand in Australia.

Kim 26:36
And I would say like as crazy as it seems in Australia, with median prices to incomes, it can get worse.

Kim 26:44
You know, like Hong Kong.

Kim 26:45
I think at its peak was like 23 times.

Kim 26:48
And I had some friends over there who It’s just so hard for them.

Kim26:52
And they have to kind of go elsewhere, like to find places that was at its peak.

Kim 26:56
It can get crazier, unfortunately.

Kim 26:58
So I think the wrenching for life it’s still not a a way to kind of secure your financial freedom in Australia.

Kim 27:06
As it stands.

Michael 27:08
Yeah, cool, awesome. And the second one is, if you’re a first home buyer and you had a million dollars to buy.

Michael 27:12
So the million dollars is there, Where would you buy?

Michael 27:14
Or I might say, What would you do with it?

Michael 27:16
Perhaps in your case, because there’s there’s a bit of investment strategy there as part of it.

Michael 27:20
So if you know where you’d buy for some reasons, let us know.

Michael 27:23
But if there’s something else you’d do with it, which obviously would be part of the journey.

Michael 27:26
I’m just trying to weave it into, you know, obviously you know what?

Michael 27:29
What you’d know.

Michael 27:29
What would you do with that million dollars?

Kim 27:32
You know, I, I have thought about this question.

Kim 27:34
Obviously, where I would buy with a with a million dollars.

Kim 27:36
There’s some incredible value.

Kim 27:38
I think out, Western Sydney Way because there’s gonna There’s a new airport gonna be going in there.

Kim 27:43
It’s a huge growth centre for Australia.

Kim 27:45
So I think like up in there’s really great value up in kind of the Blue Mountains area, some Mary’s MU plains.

Kim 27:52
And these places are like super close to Parramatta, which is, you know, like a a centre now.

Kim 27:56
And so I think there’s really great value there, similarly, down in Melbourne, I think, like the West side of Melbourne is has got great, like, sort of growth prospects and down in like, Altera Meadows and we areas, and these places are like 30 minutes from the city on the train, but sort of previously less looked at by people.

Kim 28:15
So, you know, I think I think those places kind of offer really, really great value and our growth centres for Australia.

Kim 28:21
Those properties offer great great value, of course, but, there’s really great value still in kind of a the Australian stock market and the, exchange traded funds index funds.

Kim 28:32
I think, you know, in Australia, because it is we still are like a fantastic place to live and invest and grow companies.

Kim 28:39
And while we’re growing and people are innovating, then you know companies are gonna be growing innovating themselves and producing income, which kind of gets returned to investors through the share market.

Kim 28:50
So I think there’s the Australian kind of index funds.

Kim 28:52
I think I wish I could say like Bitcoin or something, but that’s but the Australian Index funds, I think, offer a lot of value as well.

Michael 28:58
OK, cool.

Michael 28:59
Definitely not not things we normally discuss here.

Michael 29:01
But I could totally see where you know you could definitely get some value out of that and, you know, invested wisely.

Michael 29:06
I’m sure you could get some healthy returns as well, but obviously risks are associated.

Michael 29:09
So if that’s something that people are considering, definitely be guided by some professionals that know what they’re doing in that particular space, where can our listeners find you.

Michael 29:18
We’ve mentioned your book.

Michael 29:19
You know, Work less, make more. The millennial’s guide to financial freedom that people want a copy of that.

Michael 29:23
Where can they get that?

Michael 29:24
And where can they also get in touch with you if they want to ask you a question or two?

Kim 29:27
Yeah, absolutely.

Kim 29:28
Yeah.

Kim 29:28
So books available, Amazon Book Topia and, , all the kind of major major stores around Australia, et cetera.

Kim 29:36
My website is kimnorthwood.com.

Kim 29:38
So people can come on there.

Kim 29:39
They can also buy the book direct through the website and then contact me on that.

Kim 29:43
My instagram is Kim North Finance guy.

Kim29:46
People are very welcome to get in touch through that as well.

Michael 29:49
And we’ll put those details in our show notes as well.

Michael 29:50
So if anyone’s interested to check any of those details out, feel free to jump on the show notes and the links will be there to get you where you want to go.

Michael 29:57
Thank you so much for joining me on the show today.

Michael 29:59
Kim.

Michael 29:59
It’s been great.

Michael 30:00
I’ve really enjoyed this topic.

Michael 30:01
and thank you so much for your time and your insights.

Kim 30:04
Thank you.

Kim 30:04
No thanks very much for having me.

Kim 30:05
It’s been great.

Michael 30:08
You’ve been listening to the home run your guide for buying your first home in Australia.

Michael 30:12
This podcast was produced by Lendstreet.

Michael 30:15
Lendstreet is a mortgage broker and home loan specialist that helps first home buyers find the right loan to meet their needs.

Michael 30:21
We know applying for a loan can be overwhelming and complex, so we help guide and support first home buyers through the process from start to finish.

Michael 30:28
To find out more, head to our website lendstreet.com.au

Michael 30:32
We’ve also put a link in the show notes to make sure you don’t miss an episode of the home run.

Michael 30:37
Be sure to subscribe to or follow the show in your podcast app, and while you’re there, please leave us a five-star review.

Michael 30:44
It really helps others find the show.

Michael 30:47
I’m Michael Nasser and we’ll be back next episode, covering another step on the journey to owning your first home