Housing Solutions

Reporter: Graeme Butler

Now more than ever the dream is just that ... for first home buyers especially, property prices are soaring out of reach. So, is it time for Australia to bite the bullet...introduce home loans that your grandkids will be paying off? Make taxpayers subsidise interest payments?Get over the idea of owning a home alone, but share it, with another family, or even a bank...or the government?

James and Kirsty are pretty typical of young couples their age - trying to scrape together enough money as they can to buy a house - but it's getting tougher by the minute. "Looking to spend about 350 which is still an astronomical amount of money to us want a house 3 bedrooms one bathroom just the bare minimum but doesn't look feasible at the moment" and James and Kirsty are far from being alone - the Perth market is swamped with people searching for their first home.

Shane Kempton from real estate agents Harcourts believes first home buyers need to look outside the square if they want to buy... it might also mean help from parents. "Most of the population would be asset rich with the amount of growth that they've had over a couple of years that would then give them the asset base to help their children buy a home it then comes down to cash flow and availability of extra funds to fund that side of the mortgage"

Another possible solution is buying a house with another couple and sharing the cost of the mortgage.. but it comes with a warning. "They need to treat it like a business transaction have definite exit strategies and entry strategies and all those sorts of things which you would need to get good advice from an accountant we can also help steer them in the right direction as far as that advice goes"

A less risky way of sharing the cost is shared equity loans - the state government is offering shared equity on property, already almost 1500 people have applied, but it only operates for properties under $365,000 which in today's market is almost none... some banks are now looking at similar schemes.

W.A senator Alan Eggleston has some radical ideas - among them making interest tax deductible for all home owners. "In the united states interestingly home loan interest is tax deductible and I think that would make a big difference if that was brought in Australia"

Longer loans could also be an option - currently most mortgages are for 25 or 30 years - Alan Eggleston says maybe we need to double it. "Very long mortgages as they have in Germany where a mortgage might last 60 years means the repayments are lower but the total cost is greater but it still makes owning a house more affordable"

Here's how the monthly repayments on 400 thousand dollar loan look -

At 25 years its' $3,105 - 40 years $2,802 and for 60 years you'd only have to pay $2,711 a month - but here's the big catch

Your total repayment balloons - from 931 thousand at 25 years to 1.6 million over 60

But a long mortgage need not be a debt for life - it could be just the thing to get you into the market and allow you to refinance later when your finances improve.. other ways to increase your borrowing capacity is to cut up the plastic or at least reduce your credit limit - banks view credit card limits as a loan whether you owe anything on it or not.

James and Kristy are both working two jobs and have chosen to live with James' parents to save on rent - it's a good decision especially with Perth's rental market expected to rise even further to rival Sydney's.

John Edwards from real estate forecasters Residex says even though Perth tenants are feeling the pinch - it's going to get worse before it gets better - "the market in Perth will rise simply because unless it does investors won't be attracted into it to purchase property there's going to be a supply shortage all round there's currently a supply shortage in both the purchase area"

While that might be good news for landlords and investors it's cold comfort for anyone trying to enter the property market - "its disheartening it's like a kick in the head we just don't feel like we're getting any closer"

http://www.cannex.com.au/ - information on shared equity loans

http://www.ratecity.com.au/ - compare loans