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Recent property data has shown that renters are finding it more difficult to move towards home ownership due to rising property prices.

According to CoreLogic RP Data's Property Pulse, twenty years ago, 95.4% of capital city house sales were below $400,000. Three percent of sales were between $400,000 and $600,000, 1.2% were between $600,000 and $1 million, and only 0.4% were over $1 million. However in 2014, just 22.2% of house sales were below $400,000, 33.4% were between $400,000 and $600,000, 28.1% between $600,000 and $1 million and a massive 16.2% were above $1 million.

Cameron Kusher, who is CoreLogic RP Data's research analyst, says Australia’s escalating home values is making it increasingly difficult for renters to afford to buy. “The sharp decline in sales below $400,000 over the past 20 years reflects the overall growth in household debt which is attributable to housing," said Kusher.

The Reserve Bank of Australia (RBA) also believes it is the rising property prices, not the interest rate, that will keep first home buyers out of the property market. According to RBA governor, Glenn Stevens, the ability for first home buyers to get into the housing market is an important consideration for the RBA.

"The biggest enemy for first home buyers is rising house values," Mr Stevens said.

So how can first home buyers come up against these rising prices and successfully enter the property market sooner rather than later? Take a look at our tips below.

Buy an investment property first

Even if your dream property is currently out of reach, it doesn’t mean you can’t dip your toes into the property market. Buying a first property as an investment can have long term benefits like taking advantage of capital gains prior to being able to purchase a home of your own.

The type of property purchased will be more geared towards investment. It may be easier to find as location doesn't have to be where you want to live. It may also be cheaper as well. You can direct your savings towards making the loan repayments, always ensuring you don't over-commit. This way you could continue living at home or sharing an apartment close to the city with your friends.  

Use a guarantor

The most common type of guarantor for mortgage lending is a security guarantor. Instead of a family member giving a gift to help out, the guarantor allows equity in a property they own. If you are struggling to save the full deposit, this may be a way of getting your own home sooner as it may mean that the deposit required is dramatically reduced. The additional property helps bring the loan to under 80% LVR, which means that you may not have to pay lenders mortgage insurance either.

However, there are certain risks for the guarantor. If you default on your home loan or are unable to repay it, the guarantor is responsible for repaying the loan. So, make sure both parties enter into this agreement having sought the relevant legal and financial advice to ensure that they know exactly what the risks are.

Re-think prospects

With property prices continuing to increase and demand for housing not slowing down, you may find that your dream property may not be within reach for a while. But remember, even though purchasing your first home is a major achievement, the chances of you staying in your first home for forever is not very likely. You may find that moving to a less affordable area or smaller property, can put you in a better financial position and set you on the path towards a better future.

Pull out all stops to save for the deposit

While many first home buyers struggle to save while paying rent, others think outside the square to turbo charge their savings. Savings strategies range from moving back in with parents, taking in a boarder, getting a second job to starting a part time business. We would be interested to hear about successful saving strategies. Email them info@statecustodians.com.au and we can add yours to our list.

There is no easy solution or quick fix but being creative may mean that your dream of home ownership may be closer than you think.