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What To Do If You Can't Afford To Buy A House Right Now

Investing might help more than cutting back on the avocado toast and lattes.

For many young people and potential first homebuyers, looking at house prices in Australia can be just depressing. They're out of reach, beyond the wildest dreams of many. You know it. We know it. It's been demonstrated in survey after survey, in decidedly average cottages selling for nearly $4 million, in unrenovated homes going for far above the reserve, in weatherboards flatly described as "tired" going for over $1 million.

Between 2002 and 2014, home ownership rates for 25 to 34-year-olds dropped nearly 10 points, to under 30 percent. Australia was crowned with the ignoble distinction of being third least affordable housing market in the world, with Sydney's median house price -- around $800,000 -- between 10 and 12 times the median income, depending which survey you look at. A recent Domain survey found there were only 17 suburbs in the greater Sydney region where houses were within the median price point of $469,000.

Just this week, new modelling stated first home buyers need 40 years' worth of savings for a Sydney deposit. FORTY YEARS.

So what are young people and aspiring homeowners to do right now? Let's say you've got a savings plan and a monthly budget, your savings account is growing steadily, you're diligently socking away your change, you're avoiding spending big at the bar on nights out, and you've even cut back on avocado toast and soy lattes -- but you're still nowhere near scraping together enough for a housing deposit. What now?

HuffPost Australia chatted to five money experts -- financial advisers, economists and more -- for some general advice -- we asked, in general terms, what a young person (for the sake of the argument, aged between 20 and 30) who has a decent amount in their bank account (for the sake of the argument, between $10,000 and $30,000) could be doing to boost their savings.

Keep Saving

Obviously the most important thing, when you're saving, is to keep saving. Laura Higgins, senior executive leader of financial capability with ASIC's Money Smart service, said putting together a simple budget was an easy way to highlight unnecessary expenses and boost your savings.

"ASIC's 'track my spend' tool helps you get to the point where you're on top of managing day-to-day expenses. It helps you identify needs from wants, to find areas you could find to put more away," she said.

Suzanne Pereira, of Essential Super, said it was fine to think small.

"Every little bit counts. When we talk to our younger customers about saving, rather than talking about the long term and how you have to save $100,000, you should think about it in small increments. The overall sum doesn't seem insurmountable that way," she said.

Learn About Investments

Once you've got a decent amount saved up, it's time to think about how to deploy that money. Interest rates are at record lows, so keeping it locked up in a bank account likely won't add much to your bottom line right now. All the experts suggested aspiring homeowners check out investments -- stocks, managed funds and the like -- as a way to boost those savings.

"We've got low interest rates, so on term deposits and savings and a lot of interest rate products, you're not yielding as much as you used to," said Janu Chan, senior economist at St George.

"Managed funds are a possibility. You put your money in the hands of experts to pick and choose the investments to look at. You don't need to be an expert to pick stocks."

Time to learn about the stock market
Time to learn about the stock market

Managed funds see your money directed into the stock market, but instead of you going directly to your stockbroker or online to make trades, you place your money in the hands of fund managers who make those decisions for you. Your cash is pooled with many other people, and invested in a range of different stocks. It does cost more, as you're paying for experts to make those investment decisions for you, but you leverage off the knowledge of those experts and don't have to rely on yourself to make the right call.

"You apply directly to a fund manager to buy units in their fund, and they manage and invest it. There are massive options there," said Ben Greenwell, branch manager and strategy adviser at Elston financial services.

"You're paying for a team of experts. Your money pools with thousands of other investors, with millions or billions under their funds, making investment decisions for everyone collectively."

The other option there is to make your own investments, either through stockbrokers or directly online through platforms like E-Trade, CommSec, Macquarie Direct or Westpac Prime.

"You open an account like a bank account, where you can buy and sell securities for $15 a trade, but that brokerage can add up substantially. It is a bit of a risky option if you don't know much, and you need to spend a lot of time researching to find what you buy. Some people buy research, which costs more," Greenwell said.

Chan said managed funds give people some level of assurance, but to carefully check out the investment strategy of the fund and the manager first.

"We famously say past performance isn't an indicator of future performance. There can be passive and active investing, with different strategies at different times. If you've got high tolerance for risk, you could put it into a more aggressive fund, with more growth stocks. If you're more risk adverse, you might have more defensive stocks or lower risk allocation. It's ideal to speak to a planner about that kind of thing," she said.

Get Advice

All our experts also recommended speaking to financial planners about what to do with your money. A financial planner will take account of how much money you have, how much you want to invest, how long you're willing to keep your money in that investment and when you would like it back, and how much risk you're willing to take on -- as the saying goes, more risk, more reward.

"It comes down to your time horizon. With more ups and downs, you need a longer time to withstand those ups and downs. Whichever investment you choose, just have a savings plan and put small bits away fortnightly or monthly. Stay disciplined," Pereira said.

"Seeing a planner can be a bit daunting, but looking at it as regular appointments for doctor or mechanic. It's keeping your finances healthy and having the right inputs. You should not be afraid to do so. If you make an informed choice, you are likely to walk away with good tips and suggestions, for a plan you can follow," added Higgins.

Get In Early

While considering stocks can seem intimidating and quite grown-up, experts say you are never too young to dip your toe in the investing waters. Many investing guides are geared toward older people with more wealth and assets, young people can get into the market even if they're not aiming for a big purchase like a home. St George's Chan said young people could look at investing to raise money for a holiday, new car or another fun purchase.

"It's never too early to start thinking about this. You will have goals you would like to plan for -- you might want to buy a house someday. So to make the most of your savings right now, you need to think about the best thing to do with that money. These are just valuable skills anyone should pick up," Chan said, adding that it is fine to invest even small amounts.

Higgins, from ASIC, agreed.

"As long as you're making informed choices, you're not too young to be considering ways to put aside your money," she said.

Do Your Homework

But while investing and money tricks can be a good way to boost up your savings, being smart about other options can be just as -- if not more -- important. In buying a home, for instance, it pays to know about the first home buyer grants, bonuses and incentives available around the country.

Dr Nicola Powell, chief data scientist for Domain, recently published a report on home prices around the country and what assistance was out there for first home buyers. Different states have different schemes, with some incentives ranging up to $20,000.

"When you're buying, it can be overwhelming with all these terms and concepts and various initiatives different in each state, and new ones coming in," Powell said.

"Have a look at what those incentives are and apply early. Some are quite generous."

Powell suggested home buyers check out the government First Home Owner Grant website, for details on various schemes nationwide.

"Make sure to know all the incentives available and apply early. Start looking at those incentives, keep abreast if they will change," she said.

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