Finance Property Housing affordability takes a $2000 hit in just three months

Housing affordability takes a $2000 hit in just three months

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Or $4000 if you're saving the recommended 20 per cent deposit. Photo: Getty
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First home buyers will be forced to save an extra $2000 towards a deposit just to keep up with the last three months of price growth, according to CoreLogic data exclusive to The New Daily.

The median house price in the eight capital cities is now $613,200, CoreLogic estimated, based on sales in the March quarter.

At the end of last year, this figure was $592,807, which means in just three months, as hopeful buyers saved madly, the goalposts shifted 3.4 per cent further away. And that’s only for a modest 10 per cent deposit.

All up, a young couple now needs about $61,300 for a 10 per cent deposit on a median-priced house in the city. In Sydney, it’s a staggering $88,000.

If they’re saving for a 20 per cent deposit, which many banks now prefer, they’ll need $176,000 for a median-priced Sydney home – up $8200 in three months.


If prices stood still from today, a couple saving for a 10 per cent deposit in a capital city would need to put away roughly $1200 a month for the next four years, presuming they earned 2.5 per cent interest, compounded monthly.

And this doesn’t include lenders mortgage insurance (LMI), which Australian banks have made compulsory for all borrowers with deposits below 20 per cent. Gone are the days of 0 per cent deposit loans unless you have a guarantor.

A median-priced house in a capital would require roughly an extra $13,500 in LMI, which the couple would presumably ask to be ‘capitalised’ into their loan – meaning they would pay an extra $67 per month on their repayments.

To avoid LMI entirely, first-time buyers would need to save a 20 per cent deposit of $122,640, based on CoreLogic’s median capital house price. That’s $4000 more than three months ago.

And then there’s stamp duty and the litany of other upfront costs that home buyers face. Stamp duty alone could add an extra $23,000 to a median-priced home.

As these figures show, a guarantor is probably the only way for many buyers to get into the market. Many institutions will lend 100 per cent or even 110 per cent of the home value if first-time buyers have a guarantor.

There is plenty of controversy over whether or not houses are more or less affordable than ever. For example, Jamie Alcock, an academic at The University of Sydney, wrote in The Conversation last week that mortgages are now more affordable, as record-low interest rates are nowhere near the 17 per cent highs of the 1990s.

Even if that’s true, the CoreLogic figures, coupled with the tighter lending requirements of the banks, prove that house price growth is making it harder for deposit savers to keep up.

And as Professor Alcock warned, when interest rates do inevitably rise, today’s ‘comfortable’ borrowers will become tomorrow’s highly stressed repayers.

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