Even though house prices are still falling across the nation, many Australians want to become first-time homebuyers and aren’t able to enter the market.
According to Domain’s annual First Home Buyer Report, if a couple who has an average wage were to purchase a home in an entry-level neighbourhood, they would likely have to enter mortgage stress territory by having to pay more than one-third of their combined income towards loan repayments, thus entering mortgage stress territory.
In the report, it is stated that the Australian housing market has been given a “time machine” in order to promote the purchase of homes by first-time buyers across the country.
“…falling property prices in certain cities, higher interest rates accrued on savings and wage growth have aligned to reduce the time to save for an entry-priced property deposit,” Nicola Powell, Domain’s chief of research and economics, said.
But if you look at the numbers, a different picture emerges.
Australian home buyers may find it easier to save for a deposit now that home prices are falling – six months quicker on an entry-level house and two months quicker on an entry-level unit – but it is the repayments that they will have trouble keeping up with in the long run.
When you take a closer look at how much the mortgage repayments on an entry-level home (house or unit) could cost in a couple of 25-34 years old, the report shows that the average cost of mortgage repayments across the whole nation would be 37.4% for an entry-level home.
For example, couples looking to purchase a house in Sydney average a 50.9% mortgage repayment, while those looking to purchase a home in Melbourne average a 42.1%, while those looking to buy a house in Canberra average a 45.3% mortgage repayment.
“This is well over the 30% threshold and demonstrates how significant the impact of interest rate rises can be on mortgage serviceability,” the report acknowledges.More home buyers now buying houses in need of renovations