As first home buyers continue to struggle to save a deposit to purchase a property, property prices continue to rise at alarming rates. Some facts that are making it harder for first home buyers include:
Median House Prices Sky Rocket
The median house price in Melbourne is now around $630,000* – an increase of 16% over the past 12 months. This figure has almost doubled in the last 10 years, making it harder for first homes buyers to keep saving at least 10% for a deposit. Based on the median house price, a deposit of no less than $90,000 would be needed by most lenders for a loan approval.
Rising property prices are also driven by investor demand, which seem to be at an all time high at the moment.
The Reserve Board of Australia has noted strong demand in the housing market as many investors look to property as interest rates remain attractive. Current loan approvals for investors buying in property accounts for nearly 45 percent of total loan approvals at the present time.
Investors are able to use equity in their current property enabling them to borrow all of the costs associated with an investment property. In most cases, they do not need to contribute any savings to a purchase at all.
Whilst it remains a hot topic, foreign investment remains evident. As more wealthy foreign investors move into the Australian property market, they are often willing to pay well above what the house reserve would normally be. Whilst the majority of foreign investment comes from China, they are closely followed by Canada and the USA.
As lenders are continually monitored by APRA** lending policy for some financial institutions has been tightened significantly, meaning that most lenders are now only able to lend to 95% lend to value of the property, which must include Lenders Mortgage Insurance (often a huge cost to borrowers).
Specialist lending advice
Here at Mortgage Choice Camberwell, we can discuss your needs in detail and offer professional financial advice for first home buyers. First home buyers may also need to look at a family guarantee from relatives – click here for my family guarantee blog.
To learn more about what is right for you, call me, Michael Wren at Mortgage Choice Camberwell on 03 9813 3522, or email email@example.com.
* Figures sourced from REIV.
** Australian Prudential Regulation Authority