Despite falling prices, housing affordability remains an issue, especially for first home buyers in Sydney and Melbourne where home values have soared in recent years. The median home value in Sydney is $855,287, almost twice as much as Hobart ($437,254) and more than twice the regional average ($368,366). But prices are only part of the equation.
Affordability is measured by the share of income required for mortgage repayments. In June 2018, for borrowers with a 20 per cent deposit, the repayment required on the average mortgage amounted to 36.3 per cent of gross household income. Ten years ago, it was 51 per cent. That’s due largely to mortgage interest rates almost halving over the same period, according to CoreLogic’s latest Housing Affordability Report.
For first home buyers, the biggest stumbling block is often saving a deposit as rising prices push desirable properties further out of reach. But with prices expected to fall over the next couple of years, time is on your side.
Now that banks are tightening their lending criteria, self-employed people will need at least three years of tax returns and PAYG earners will have their expenses examined more closely.
Homeowners planning to downsize have an opportunity to sell now near the market peak and buy a smaller property in a falling market. What’s more, if you are over 65 you can put up to $300,000 of the sale proceeds into your super for a significant tax saving.
If you are looking to buy or sell a home or an investment property and would like to discuss your options, give us a call.