I was recently talking to a friend who was very stressed about the state of the housing market in NSW.

He and his wife really want to get a foot in the door, but as first time buyers, with no equity hidden away in previous purchases, their capacity to save up that whopping $80k to $160k deposit is severely challenged.

They can eat each day and put petrol in their car, OR they can get a deposit together in the next five-to-ten years.

So what can they do?

We've published so many articles on our site about how to save up for and pay off a home loan. The fact-of-the-matter is, even if a lot of first home buyers stop buying coffee, scratch avocados off the shopping list and move a little further out, the opportunity to buy in a major city seems to be financially impossible.

Now, that's not to say it's off the board completely. Some Gen Ys and younger are absolutely in the market, but just because they managed to scrape and save or find some help, doesn't mean everyone can do it.

Some property owners are starting to recognise this issue, and in order to open up the market for their property to more buyers, they are offering to finance at least part of the deal themselves.

We sat down with Sale Ezy CEO, Allan McDonald, to talk to him about one property owner who is offering a hell of a deal!

1. Do you think buying a home is out of reach for young people these days?

Yes and no. I have three daughters all (almost) in their thirties. One of them owns a home and an investment with her partner, the other two don't.

I'd like to think my other daughters will have the chance to buy some time in the next five-to-ten years, but with prices this high and incomes really not growing to match, it's unlikely they'll get that opportunity in Sydney where they live.

It can be done, absolutely, but the state of the market unfortunately means it probably can't be done by everyone on the terms they'd like.

2. What do you mean? What terms?

Well, there are two factors at play here... when my wife and I were starting out, it wasn't the usual thing to buy an investment for your first purchase. You saved up and your first purchase was your first home, the first place you lived together and owned as a couple.

But... that was almost 40 years ago.

I won't lie, it felt like our incomes were pretty low back then. I was earning only in the $20k range and my wife was a stay-at-home mum. Thankfully, house prices where we lived in a NSW, country town, were affordable. We purchased our first place, a three bedroom, weatherboard house for around $45k.

Despite the fact that prices, especially in the city, have escalated so rapidly, it's natural that your first preference is to want to do what we did -- buy your first place to live in it. But if those are your unwavering terms, you just may not get into the market if you are Sydney-based like my daughters.

The second factor at play is the state and federal government's first home buyer initiatives. In a very simple summary, if you want to get access to them and benefit from them, you actually have to live in the first place you buy.

This is a really difficult thing to resolve for young people -- they want to live where they buy, they want to benefit from first home owner initiatives, but they also don't want to move away from jobs or have to travel hours on public transport each day to get to work. Quite reasonable desires I'd say!

The tough thing is, those are the terms, so if you want to get into the market sooner, rather than later -- or at all for some people -- you need to compromise.

Perhaps you need to look outside the big cities and think about moving to smaller towns for a few years to get your foot in the door, live in your first place and get those government benefits.

Or perhaps, if you want to stay where you are, you need to compromise and purchase a property on the outskirts of the city to live in. You could also forget the first home buyer initiatives and buy elsewhere, in affordable towns and regional hubs, rent out the property and let your tenants help you with your mortgage.

3. But there must be other options

As an agent of 30 years, I have seen people buy property in a lot of different ways. While I certainly won't say it's a growing trend -- actually it's quite rare -- something I've seen and heard about a bit more lately is property sellers (who can afford it), looking to make that purchase easier for their buyer.

Right now, I have a client -- a property owner -- who is doing just that.

He has a great property with a lot of potential for subdivision and accommodation available for sale. As a Sydney resident, he is acutely aware that the tightening of the banks and the average salary of people in my local area, may mean lending institutions aren't going to be eager to hand over the more than one million dollars it will take to purchase 80% of his property.

So he's providing a unique opportunity by offering to lend part of the money to the buyer, himself.

Essentially, the buyer needs to bring 50% to the table, and in turn, he will lend them the other 50% at an interest rate lower than that offered by the bank.

This is a really intriguing opportunity and a chance for those who may not be able to get the money from tighter banks, but who know they can make those repayments, to purchase a property that could deliver a lot of return.

Like anything, there is paperwork required and everything must be above board -- the lending agreement between the property seller and the buyer will be as airtight as a bank mortgage agreement -- but it is still a really interesting option for both sellers who can afford it, and buyers, to explore.

While, as said, this approach is by no means popular, we are seeing a few more very legal but quite innovative opportunities coming up to help buyers get to where they need to be.

4. Do you think the market will ever be ripe for the average first home buyer?

I think we have to be honest with ourselves on this one.

Over the last five years, when the market was high, save for the dip last year, people said 'if only the prices would drop so first home buyers can get in'. Then they did. Notably.

First home purchasers did rise in the face of lower asking prices, but a lot of people were still stuck outside the market.

One of the great things about real estate as an investment is, most of the time, it appreciates in value... only in unique circumstances, like the recent skyrocketing of prices and then correction, have I seen property owners left reeling as their assets lost value.

What this means is that even if prices drop, they aren't going to drop by any great margin, so unless wages increase to meet them, that struggle is always going to be real.

The best we can do as potential first home buyers or parents of first home buyers (especially those who can't financially help out or choose not to) is:

  • Make sure your kids really research the market and understand it if they want to get into it
  • Ensure they are getting advice from the RIGHT people -- just because you have purchased one home in the past doesn't necessarily mean you know how to navigate the market for the best outcome
  • Make sure they shop around for loan terms and interest rates
  • Help them buy at the right time
  • Make sure they purchase in a growth area. If the market drops, low growth areas are the first affected, and their equity could decline.
  • Encourage them not to ever borrow 100% with a guarantor. They are exposed to any change in the market that can decrease equity to a negative, potentially forcing a resale.
  • Help them weigh up the compromises they may need to make so they are making the best decisions possible.

Allan McDonald is a regional-based agent and auctioneer of 30 years and founder of Sale Ezy. A father of three adult children, he is focused on helping ensure real estate negotiations and transactions are as transparent and fair as possible, and every person involved in a real estate transaction feels they have been fairly and frequently communicated with and supported.