Young buyers leveraging family home equity to afford inner city purchases: Buyer's agent

It is becoming more common for generation Y to move to inner city or CBD areas and purchase properties using their family’s home equity, according to founder of Sydney-based Dream Design Do, buyer's agent Zaki Ameer.

“Upon finishing their studies, young adults find that their place of employment is located in the CBD, as well as all the amenities they want to access, such as nightlife, entertainment, and retail offerings,” says Ameer.

“In Sydney, these locations are typically the eastern suburbs and the inner city, and in Brisbane its Newstead and Fortitude Valley.”

“Property is priced way outside of capabilities of the salary of a career starter, so purchasing a property in the desired location of these Gen Y’s is impossible.”

This is forcing young people to draw on their family home equity which is becoming one of the easiest pathways for young people to tap into the property market, said Ameer.

“In many cases, the family home is already paid for, which creates substantial security when applying for the loan”.

“Provided the youngster is gainfully employed, purchasing in the area where it’s all happening is right within his/her foreseeable future.”

According to Ameer this option was not possible for past generations. The parents of today are likely to work longer and are not keen on downsizing or moving to a retirement complex for some years.

“Their parents do not see themselves as old, and therefore are in no hurry to sell the family home. They don’t want to live among retired people or senior citizens, and more than likely are perfectly happy in the family home surrounded by families and young people.”

Ameer said parents could use their children’s move to the city as an investment opportunity.

However, if parents aren’t in a position to draw down on their equity another option is renting which Ameer says is costly but manageable.

If renting is also too expensive and they are still keen to enter the property market, they may purchase a property in a cheaper area, and then work on building equity on that property so that they can buy in their target area in the future.

According to Ameer, another option is taking up employment in a different city where property and living cost is cheaper.

“In their 20s, they probably do not have a lot of personal responsibilities, and are more easily able to relocate,” he said.

“They will see it as an adventure; to work and live in another state than where they grew up, and also often take the opportunity to establish themselves when they are there, by purchasing property that is now affordable for them.”