3 surprising facts I’ve learnt about the Australian property market

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3 surprising facts I’ve learnt about the Australian property market

Adam Smith – Finder.com.au 

As an American who’s lived in Australia for the past seven years, I found the property market and the Aussie attitudes towards it a bit surprising at first. But the longer I live here, of course, the more I learn and the less perplexing Australian property seems.

Having written about the Aussie housing market day in and day out for most of the last seven years, you would think that there would be very few stones left unturned. However, after recently beginning my own property search, it’s become clear that there’s a lot left to learn.

Surprising fact #1: Your deposit isn’t as big as you think it is

Saving for a deposit is the single biggest hurdle facing most first home buyers. With property prices growing and wage growth stagnating, many of us feel like we’re chasing a moving target. And one detail I failed to take into account in my own experience is that the deposit you’ve saved might not give you the buying power you think it does.

The median dwelling price in Sydney as of last month was a staggering $909,914. If you manage to save a 10% deposit of $90,991 or so, you might think you’re in the clear. But there are other costs you may have failed to account for.

The first is stamp duty. Depending on where you live, the type of property you’re buying and the price you pay for it, you could get hit with a stamp duty bill in the tens of thousands. For a median-priced dwelling in Sydney, for instance, you’d be paying $36,717.60 in stamp duty and mortgage and title transfer fees. Suddenly, that 10% deposit of $90,991 has shrunk to $54,273.40, or around 6%.

Add onto this any application and settlement fees associated with your home loan and your deposit shrinks by a bit more. On top of this, building and pest inspection reports, removalists and any other costs associated with moving into your new home can chip away at that deposit money.

That’s why it’s wise to budget for these costs before you apply for a home loan. By taking these added charges into account, you can get a better idea of your borrowing power. And if you need help saving for a deposit, you can always check out this handy guide.

Surprising fact #2: First home buyers are still making inroads

With high house prices and unaffordability making headlines on a seemingly daily basis, you’d be forgiven for thinking that first home buyers have been locked out of the market. First-time purchasers have no doubt had it tough over the past few years, and there have been times when their numbers have dwindled to record lows. But in spite of all the talk of an inaccessible property market, first home buyers are making a comeback. I can speak for myself here, as I’m one of them.

The latest figures from the Australian Bureau of Statistics show that first home buyer numbers swelled in July, up to 16.6% of all buyers. That might sound low, but it’s the strongest result for first-time buyers in more than two years.

So what’s bringing first home buyers back to the market? Some have been enticed by state government initiatives. New South Wales and Victoria recently launched reforms that have seen stamp duty concessions extended, meaning fewer first home buyers are hit with a massive stamp duty bill.

First home buyers are also being helped by regulatory action that’s taken some of the cashed-up investors out of the market. The Australian Prudential Regulation Authority (APRA), which regulates Australia’s banks, has made moves this year to try to curtail speculative investment, leading to a slower investor market and less competition for first home buyers. This, along with slowing property price growth, is helping first home buyers gain more confidence in jumping into the market.

Surprising fact #3: There are still great home loan deals out there

It’s been more than a year since the Reserve Bank of Australia (RBA) last trimmed the official cash rate. With inaction from the RBA, one might think that the home loan market has remained relatively static. Nothing could be further from the truth.

Lenders have been fiercely competitive with one another, slashing rates for owner-occupiers in a bid to bring in more business. With lenders ramping up the competition, you can benefit in a big way.

I’m consistently surprised that just when it seems like the rates have found their floor, lenders make even deeper cuts. On this very website, you can find home loan rates from an incredibly low at 3.44%. That’s impressive considering the average standard variable rate is 5.08%.

If you’re a first home buyer, this is very good news. Not only is the market becoming more accessible to you, but you can expect to get a great deal on your first home loan. As much as we’re hearing a lot of doomsaying from media and property pundits at the moment, it’s actually not a bad time to be a first home buyer. That might be the most surprising fact of all.

(29)    For the Rate Cutter Variable where the borrower pays $1170 upfront fees then a corresponding loyalty discount of 0.10% p.a. off the Rate Cutter Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(27)    For the Investor Rate Slasher Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Slasher Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(26)    For the Low Rider Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(25)    For the Economizer Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Economizer Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(24)    For the Super Saver Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.10% p.a. off the Super Saver Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(23)    For the Super Saver Variable where the borrower pays an upfront fee of $1170 then a corresponding loyalty discount of 0.15% p.a. off the Super Saver Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(22)    For the Economizer Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.11% p.a. off the Economizer Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(21)    For the Investor Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(18)    For the Home Owners Dream 1 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(20)    For the Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(14)   For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(12)   For the Investor Rate Lovers Interest Only where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.07% p.a. off the Investor Rate Lovers Interest Only rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(11)   For the Wealth Maximizer 3 year fixed Principal & Interest where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(10)    For the Wealth Maximizer 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(9)    For the Home Owners Dream 3 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(8)    For the Home Owners Dream 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(7)    For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(6)    For the Investor Rate Buster Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Investor Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(5)    For the Rate Buster Variable where the borrower pays an upfront fee of $150 then a corresponding loyalty discount of 0.05% p.a. off the Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(4)For the Rate Slasher Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.08% p.a. off the Rate Slasher Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(3) For the Investor Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Lovers Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(2)For the Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Rate Lovers Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(1) For the Low Rider Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(28) For the Rate Crusher 1 Year Fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.05% p.a. off the Rate Crusher reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(19) For the 1 Year Fixed Wealth Maximizer where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the 1 Year Fixed Wealth Maximizer reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.