If you visit realstate.com.au with the objective of finding an affordable property in the main Australian cities, you will be presented with more than double the amount of $1 million properties as there are of properties that fall in the sub-$500k range. Of course, this is not the case everywhere. In the Perth area, for example, median prices are approximately half that of those in the suburbs of Sydney. Even so, the figures show that there has been a significant rise in property prices in the last year, leading to a shortage of affordable homes, making it hard for the first-time buyer.
A Challenge for First Time Buyers
According to Cameron Kusher, realestate.com.au’s Director of Economic Research, the surge in prices over the past year is presenting some real challenges to first-time buyers. Furthermore, says Kusher, the reduction in borrowing costs since the beginning of the pandemic means that borrowing capacities have increased contributing to large price increases.
Add to the Homebuilder incentive as part of the government’s stimulus package and people having fewer ways to spend their money due to restrictions, it’s no surprise that first-time buyers are struggling to get on the property ladder.
Perth Property Prices
In Perth, the median house price has risen from *$471,500 to $520,000 during the last year. While this is not as much as some areas, it is still enough to add to the cost of borrowing and the capacity to secure the right mortgage. The trouble is that the 20% deposit required by Perth first-time buyers was a median average of $94.3k – that is now $10k more at $104k. These moving goalposts make it a harder target to achieve, making that first rung of the property ladder even higher off the ground.
With Perth and Darwin now being among the most affordable places in Australia, it could be that we see more people relocating out of the big cities such as Sydney, Canberra, and Melbourne as well as adjusting their expectations of what they can afford.
Median sales price calculated for house sales in the past 12 months till end June 2020/June 2021
What Lies Ahead?
So what does the rest of the year look like and when can we expect this growth boom to slow? Economists from the country’s 4 big banks predict that prices could grow by at least another 10% or as much as 17% this year, slowing to 5/6% in 2022. Factors such as rises in fixed mortgage rates and the possible action of regulators will start to slow the market. This means that for now at least, first-time buyers need to factor in these potential percentage growths into their savings plan and/or adjust their expectations.
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