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Home sweet home: Your guide to the FHSSS

23 July 2018

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

The First Home Super Saver Scheme (FHSSS) came into effect on 1 July, and the property market has started cooling, so could the time have come for first-home buyers to make their move? CERTIFIED FINANCIAL PLANNER® professional Jeremy Chiel from Stonehouse Group shares some insights into the challenges and solutions facing younger people when it comes to home ownership.

Housing affordability has been in and out of the headlines, as Australian property values have soared and now started to fall. With wages staying relatively low in comparison, many younger Australians have been finding it hard to get their feet on the property ladder. So is the great Aussie dream of owning a home becoming a myth for our younger generation?

Property is still high on the list

In Jeremy’s experience, owning a property isn’t something young people have given up on. It’s still important to them but they’re also keen to make the most of their time and money before taking on this big financial commitment. “Younger people certainly do seek to buy property and this is a priority for them,” says Jeremy. “However, having experiences such as trips overseas has increasingly become a strong focus. Home ownership can seem like a significant challenge and there has been a mindset shift making young people more comfortable if this comes later. Having said this, their acceptance of this longer timeframe usually only comes if there are lifestyle experiences to be enjoyed at the same time.”

What are the barriers young people face?

So when someone is ready to join the ranks of home owners, what are the issues they’re facing? According to Jeremy, the picture may not be as bleak as many think. “There are so many comments in the media about young people having their hands tied by soaring values when it comes to buying property,” says Jeremy. “But there are many avenues to home ownership and people are often so deterred by the hype around housing affordability, they don’t even look at these possibilities and the actual costs involved.”

To support clients in achieving property buying goals, Jeremy starts by exploring why they’re motivated to own real estate in the first place. “Our first conversations are about what they value about home ownership,” says Jeremy. “Is it an inherited idea from your parents, is it about achieving stability and security for your family or is it more about having an asset that’s a stable foundation for your financial security? When you understand what your purpose is, you can clearly define your actual goal – which might be having your own home to live-in now, or building up your equity through an investment property purchase.”

When you’ve matched up your motive to buy with a property goal –whether that’s living in your very own home or more of a rentvesting approach to ownership – the next step is to take a good look at your numbers. “Do you know how much property really costs in the area where you’re looking to buy?” says Jeremy. “Then you’ll determine the deposit needed and ongoing cost of servicing your loan. Having these actual figures in front of you helps put together a complete picture of what different options look like. And based on any surplus income you have, you can put a number on how long would it take to save that deposit. Once you have a concrete idea of your goal, it becomes more real, which motivates you to take action.”

Is the FHSSS going to help?

As of 1 July 2018, first-time buyers can now redraw voluntary contributions made to their super to purchase a property they intend to live in. The First Home Super Saver Scheme (FHSSS) allows withdrawal of up to $15,000 in extra contributions by eligible super account holders in each financial year, and up to $30,000 in total.

As Jeremy points out, this makes for a tax-effective solution to saving for a deposit, but has found many young people aren’t clear about what the scheme involves. “Overall there are benefits with the FHSSS but people are finding it convoluted and complex,” says Jeremy. “Some aren’t aware of it at all and others get the impression they’re able to access any part of their existing super balance to buy property. There are tax advantages associated with the FHSSS, but it is important to realise it still assumes an individual has the ability to save.”

Budget to save and live well

Although it may require better communication to promote the benefits and trigger take up of the FHSSS, Jeremy believes it’s a step in the right direction to get young people in the habit of saving –and taking an interest in their super. “If you can learn to appreciate the advantages of saving early –whether it’s for a home or retirement – you’re getting in a habit that can help you enjoy a comfortable lifestyle, whether you rent for a lifetime or buy. Assuming your annual income covers expenses with extra to spare, you can set aside funds for your savings and for immediate lifestyle goals. That second amount can be spent on anything, guilt-free!”

So overall, does Jeremy encourage young people to put property ownership on their wish list? “Home ownership is important for financial wellbeing due to the foundation it provides,” says Jeremy. “You might be purchasing a home as a lifestyle choice, but it’s also an asset which can appreciate over the long term with tax-free capital gains. Assuming there is growth over the long term, it offers the ability to access finance in order to further expand assets and purchase more property or shares.”

Planning to invest in property or buy a home? Get insights on how property compares with other investment opportunities and tips on borrowing without stretching your budget.