Taking Small Steps towards a Big Dream

Owning a dream home is a significant milestone for many individuals and families. However, one of the biggest obstacles to realising this dream is saving enough for the down payment, alongside the relevant expenses such as legal fees, government taxes and interior furnishing. Usually, the down payment required is proportionate to the property price, which tends to increase over the long term. Thus, to succeed in saving for your dream home and managing these expenses requires clear goals and unwavering determination.

The Skyrocket Property Prices

While short-term property prices can fluctuate due to numerous factors such as economic conditions, market demand, government policies and recession cycles, historical data shows a general upward trajectory over the long term. It presents a growing challenge for households to afford their own homes. The 2023 edition of Demographia International Housing Affordability, which gauges the housing affordability in 94 major markets across 8 nations using a measurement of income in relation to housing prices, indicates that while housing affordability generally stabilised in 2022, housing prices are higher than before the pandemic*. Among the nations compared, Hong Kong has been the most unaffordable market for 13 straight years. The figure released in 2023 was 18.8, which means an individual in Hong Kong would need to forego eating or drinking for 18.8 years to afford a property.

Although the down payment percentage may vary based on lending practices, local regulations and the market conditions of different regions, the required amount generally increases with the property prices.

Realising Homeownership Challenges

1. The down payment: The down payment is a substantial upfront cost for home ownership. It is a percentage of the property price, which can vary significantly across different regions and countries. In general, a down payment typically ranges from 5% to 20% of the total property value. However, certain factors, such as the buyer's creditworthiness, the type of mortgage and government regulations, can influence the down payment requirements.

2. Other expenses: Remember that saving for the down payment is only part of the equation. Set aside extra money to cover legal fees, government taxes, interior furnishing and other associated expenses.

3. Future affordability: While this article focuses on the initial expenses of homeownership, it is vital to consider long-term financial commitments during the planning stage. Assessing your affordability to repay the mortgage, especially in high-interest rate scenarios, is crucial. You should also anticipate potential management and maintenance fees.

A Guide to Navigating the Hurdles

“So many of our dreams at first seem impossible, then they seem improbable, and then, when we summon the will, they soon become inevitable.”
-- Christopher Reeve

Having a home is a dream for many people, but the aforementioned challenges make it seem unattainable. However, with determination and careful planning, it is possible to turn the seemingly impossible into a reality. Take the following guide as your first step towards achieving your dream home.

1. Set a clear goal: First thing first, determine the amount you need to save, considering the current property prices and the percentage required as a down payment. Having a specific target will provide you with direction and motivation.

2. Create a budget: Track your monthly income and expenditures for a few months and categorise them into essential and non-essential items. It helps you estimate your affordability after all the necessary expenses are taken into account.

3. Cut unnecessary expenses: Evaluate discretionary expenses such as dining out or entertainment that can be reduced. That doesn’t mean to make your life bland but prioritising your homeownership goal over some current enjoyments.

4. Establish a regular savings plan: Set up a regular savings plan and reserve the contribution amount soon after you get your pay every month. It ensures that you consistently save without the temptation to spend the funds elsewhere.

5. Increase income: Explore opportunities to boost your income, such as taking on a part-time job and putting any additional earnings towards your down payment fund.

6. Equip yourself with relevant knowledge: You can acquire news and information about the property market on the Internet. You may also consult with people specialising in home buying. It will help you optimise your down payment savings strategies.

7. Monitor and adjust: Regularly review your progress towards your savings goal and make adjustments as needed. Track your expenses, savings contributions and market trends to ensure you stay on track.

8. Be disciplined and patient: It takes years of effort to save such a large sum of money. Stay committed to your budget, savings plan and financial goals, knowing that your efforts will bring you closer to achieving your dream of homeownership

Saving for a down payment and other initial costs is a crucial step in achieving your dream of homeownership. It may seem challenging yet it’s achievable with careful planning and determination. As you embark on this journey, always remember your original aspiration and you will find the saving process not only manageable but also enjoyable.