Housing affordability has hit a historic low with mortgage repayments now consuming almost half of household income but there are some causes for hope and tips that can ease the financial woes.
Housing affordability has hit a record low, as the proportion of income required to service the average loan climbed to a tick under 50 per cent.
REIA’s latest Housing Affordability Report found that the proportion of median family income required for average loan repayments lifted to 48.6 per cent, an increase of 0.4 percentage points from the previous quarter.
It marked the most challenging position borrowers had found themselves in since the REIA began monitoring this data almost 30 years ago.
Affordability declines were observed across all other states and territories other than modest improvements in Tasmania and Northern Territory, with the Australian Capital Territory experiencing the steepest drop of 1.4 percentage points.
REIA President, Leanne Pilkington, expressed alarm at the growing burden being placed on Australian households.
“The figures underscore the persistent challenges faced by families striving to enter the housing market or manage their existing commitments.
“Rental affordability also saw a decline over the same period, with the proportion of income required to cover median rents increasing to 24.9 per cent. While Victoria and Queensland recorded marginal improvements, New South Wales bore the brunt of the decline, with affordability falling by 1.0 percentage points.”
“Rising mortgage sizes coupled with stagnant variable interest rates continue to push affordability further out of reach.
“Despite the Reserve Bank of Australia maintaining the cash rate at 4.35 per cent and a stable quarterly average standard variable interest rate of 8.8 per cent, the affordability crisis persists.
“The quarterly average three-year fixed interest rate saw a slight decrease of 0.5 percentage points to 6.3 per cent, but this has done little to alleviate the mounting pressures on borrowers.”
Ms Pilkington said that without meaningful policy action, homeownership would remain an increasingly elusive goal for many Australians.
“First-home buyers, often seen as a bellwether for market conditions, faced a mixed scenario, with the number of new loan commitments falling by 3.9 per cent compared to the previous quarter but remaining 9.4 per cent higher year-on-year.
“However, the average loan size for first-home buyers increased to $536,561, representing a 0.8 per cent rise over the quarter and a notable 6.7 per cent jump over the past 12 months,” she said.
Queensland recorded the highest increase in average loan size at 3.0 per cent, while decreases were noted in New South Wales, Tasmania, and the Australian Capital Territory.
No immediate interest rates respite
The RBA appears unlikely to cut interest rates as soon as many would like but there is a glimmer of hope on the horizon for those with budgets at breaking point.
Graham Cooke, Head of Consumer Research at Finder, said it had been a tough year for most Australians.
“The cost-of-living crisis continues to place significant pressure on households.
“Young Australians—particularly those renting, paying off a mortgage, or raising children—are feeling the strain most acutely.
“The good news is that Australians could see a rate cut this financial year, with most experts on our panel expecting the first cut to occur within the first three meetings of next year.”
Source: Finder’s RBA Cash Rate Survey
Adelaide Timbrell, Senior Economist, ANZ, said she expected the first rate cut to be in May.
“With the economy – notably jobs growth and business conditions continuing to show resilience, we are also shifting our view on the quantum of rate cuts and now expect only two, in May and August 2025. That leaves the terminal cash rate at 3.85 per cent,” Ms Timbrell said.
Shane Oliver, Chief Economist and Head of Investment Strategy at AMP, also predicted a rate cut in May but believed the RBA should move earlier.
“With inflation trending down and weaker than expected growth we think the RBA should cut earlier and there is still a high chance of a February cut,” Mr Oliver said.
Thoughts, prayers and financial advice
Despite the trying financial conditions, there were measures and approaches that could be adopted by borrowers struggling to keep their head above water.
Matt Turner, Managing Broker, GSC Finance Solutions, said “if you want to buy property, get in before the rate cut.”
“We are certainly getting a feel from our client base that there will be renewed optimism in the property market once that first cut hits and it will definitely be a mental barrier to bring buyers back to the market.”
Helen Avis, Director of Finance, Specialist Mortgage, said there’s a lot more to a home loan than just the interest rate.
She stressed that there were pros and cons to be considered either way.
A pro is that you can use redraw and offset to reduce your interest bill and pay off your home loan sooner.
Cons are that your lender may charge you a higher ongoing fee or higher interest rate to access these loan features. Also, you may be charged a fee for each redraw transaction.
Mala Raghavan, Associate Professor, University of Tasmania, said households should be acting with caution when it came to spending.
“While the Australian economy may not face a technical recession, growth is expected to slow, leading to a more relaxed labour market.
“In light of this, households might consider adopting a cautious approach to spending, especially on larger purchases.
“Although the cash rate is anticipated to decrease in May, it will only come down by 25 basis points, so, the fall in cash rate is unlikely to significantly relieve the pressure on mortgage holders.
“By being mindful of their financial decisions, households can better navigate the economic landscape ahead.”
Richard Holden, Professor of Economics, UNSW, had more succinct advice for those facing financial stress due to high interest rates.
“Pray.”
Article Q&A
How affordable is Australian property?
REIA’s latest Housing Affordability Report found that the proportion of median family income required for average loan repayments lifted to 48.6 per cent, an increase of 0.4 percentage points from the previous quarter. It marked the most challenging position borrowers had found themselves in since the REIA began monitoring this data almost 30 years ago.
How much income is needed to pay rent in Australia?
Rental affordability saw a decline over the last three month, with the proportion of income required to cover median rents increasing to 24.9 per cent. While Victoria and Queensland recorded marginal improvements, New South Wales bore the brunt of the decline, with affordability falling by 1.0 percentage points.
What is the average variable interest rate in Australia?
The Reserve Bank of Australia is maintaining the cash rate at 4.35 per cent, while the quarterly average standard variable interest rate is 8.8 per cent.
Even as national property growth eases, the median dwelling value in Australia has hit eye-watering record levels.
If you want to buy the median priced home in Australia, you’ll now need to rustle up $800,000.
The latest PropTrack Home Price Index report has revealed that home prices hit a record level in November, up 5.5 per cent on a year ago.
While price growth is easing, prices in Perth, Adelaide and Brisbane continue to far exceed average income growth and fuel the national price gains.
Australian wages grew by 3.5 per cent in the year to the September quarter 2024.
For those trying to get a foot on the property ladder or investors who have been waiting for a better time to buy, they’ve seen prices skyrocket in the mid-sized capitals well beyond their modest earnings increases.
Perth real estate leapt 18.7 per cent, Adelaide 14.6 per cent and Brisbane 12.6 per cent. Even Sydney, which has slowed appreciably in 2024 since soaring in previous years, saw prices eclipse income gains by just over 1 per cent.
Those timing the market fared better in the other major cities, with Melbourne property prices slipping in 2024 and now 4.4 per cent below their peak. Hobart, Darwin and Canberra each recorded modest annual price growth but still below the average wage increase.
Report author Eleanor Creagh, Senior Economist for the REA Group, said Australian home prices hit a new peak in November after 23 consecutive months of growth.
“While housing demand has remained resilient to persistent affordability constraints, we have seen the pace of home price growth slow since earlier in the year.
“This softening in growth has occurred alongside a surge in stock for sale, giving buyers more choice and reducing the urgency to transact, however, performance has varied across markets with differing supply and demand conditions.”
According to data released by SQM Research on Tuesday (3 December), total nationwide residential property listings rose by 7.6 per cent over the month of November 2024, to 272,645 listed residential properties.
“The increase in properties hitting the market this year has been met with strong demand, but increased stock for sale has been a contributor to slowing price growth, along with affordability constraints and the sustained higher interest rate environment,” Ms Creagh said.
“In the period ahead, home prices are expected to lift, though the pace is expected to remain softer, trailing the strong growth in prices over recent years.”
According to PropTrack, after a two-and-a-half year decline Hobart was the surprise leader in terms of median dwelling value growth in November, ahead of usual candidates Perth, Brisbane and Adelaide.
What it takes to buy the ‘average’ home
With the average home now costing $800,000 and the affordability index dropping by 25 per cent over the last five years, Australian house prices are now among the least affordable in the economic bloc of more than 30 OECD countries.
Shockingly, only 10 per cent of Australian homes are affordable for average-income earners, according to a recent report by ANZ and CoreLogic.
To buy an $800,000 home without going into mortgage stress whereby loan commitments exceed 30 per cent of income, it works out to be an annual income of $178,160.04 in order to comfortably pay off that mortgage. Shared down the middle, two people would need to be earning $89,080 each year.
A standard 20 per cent deposit for an $800,000 home equates to a hefty $160,000.
Using API Magazine’s property finance calculator, the monthly instalment after the deposit for an owner-occupier paying principal and interest on a 25 year loan at the average variable interest rate of 6.83 per cent on a $640,000 home loan would be $5,568 per month.
Finding almost $67,000 a year for the mortgage is beyond the reach of many. And for first home buyers it’s even worse, with the average loan-to-income ratio for first-time buyers having increased from 3.5-times to 4.5-times over the past three years.
Affordability stifling further growth
There are signs now that property price growth around the country is grinding to a halt.
A surge in new listing volumes through spring, interest rates showing little sign of easing, and prices now demonstrably unaffordable for most prospective buyers, price pressure is easing.
The increase in stock for sale has seen the pace of price growth slow in Brisbane, Adelaide, Sydney and Melbourne, the latter of which is also weighed down by higher property taxes.
Perth led the rise in total listings with a significant monthly increase of 20.0 per cent, followed by Adelaide at 16.7 per cent, and Hobart with a 12.2 per cent rise. Canberra and Brisbane also recorded increases of 8.3 per cent and 8.5 per cent, respectively. Melbourne recorded a rise of 6.2 per cent, while Sydney had a smaller increase of 4.7 per cent. Conversely, Darwin was the only city to see a decrease, with listings down by 2.7 per cent.
Ms Creagh said the state capitals were definitely levelling out.
“In Sydney, greater stock for sale has been a contributor to the sharp slowing of price growth, along with affordability constraints and the sustained higher interest rate environment.
“Price momentum has been weaker in Melbourne over the past four years in part due to greater buyer choice and higher property taxes and, additionally, construction activity in Victoria has aligned more closely with population growth over the past decade.”
Adelaide remained one of the country’s top performing markets in November.
“Although the number of properties hitting the market has increased through spring, total stock on market remains constrained as new listings are quickly absorbed amid strong buyer demand,” Ms Creagh said.
“The comparative affordability of the city’s homes has contributed to persistently strong growth of recent years, though the pace of price growth is slowing with affordability having deteriorated significantly and the higher interest rate environment persisting.”
She said sellers in Perth have held the upper hand through spring and although the number of properties hitting the market has increased, total stock on market remains historically low as new listings are quickly absorbed amid strong buyer demand.
“Despite remaining the top performing market for annual home price growth, growth has slowed over the past quarter in line with the slowing momentum seen in other markets.”
For those still trying to time the market, it may be too little too late.
Article Q&A
Is wage growth keeping up with property prices?
Australian wages grew by 3.5 per cent in the year to the September quarter 2024. Perth property prices leapt 18.7 per cent in that time, Adelaide 14.6 per cent and Brisbane 12.6 per cent. Even Sydney, which has slowed appreciably in 2024 since soaring in previous years saw prices eclipse income gains by just over 1 per cent. Those timing the market fared better in the other major cities, with Melbourne property prices slipping in 2024 and now 4.4 per cent below their peak. Hobart, Darwin and Canberra each recorded modest annual price growth but still below the average wage increase.
What is the median home price in Australia?
If you want to buy the median priced home in Australia, you’ll now need to rustle up $800,000. The latest PropTrack Home Price Index report has revealed that home prices hit a record level in November, up 5.5 per cent on a year ago.
Is Australian property affordable?
Shockingly, only 10 per cent of Australian homes are affordable for average-income earners, according to a recent report by ANZ and CoreLogic.
What income is required to buy the average Australian property?
To buy an $800,000 home without going into mortgage stress whereby loan commitments exceed 30 per cent of income, it works out to be an annual income of $178,160.04 in order to comfortably pay off that mortgage.
An expected interest rate cute in early 2025 could result in another property market boom, but the likes of Canberra, Sydney and Melbourne would experience relatively strong declines if they don’t materialise.
Whether or not Australian real estate markets soar or struggle is almost entirely down to whether or not interest rates are cut in 2025.
That’s the finding of SQM Research, which on Tuesday released its Christopher’sHousing Boom and Bust Report 2025 that concluded Perth was set for another bumper year regardless, while property prices in Sydney and Melbourne would likely retreat by up to 5 per cent.
The report factored in a series of potential economic eventualities, but used its base case scenario as one in which there would be a 25-50 basis point rate cut midway through next year and population growth of 500,000-plus.
In that circumstance, the report forecast property values would rise 1-4 per cent as long as there were no new inflationary outbreak events.
Sydney and Melbourne housing prices are predicted to continue to record moderate housing price falls of between 1 to 5 per cent, while Canberra was the market to avoid with expected price falls of 2 to 6 per cent.
Perth, Brisbane, Adelaide and, more surprisingly given its current stagnation, Darwin are expected to outperform the national housing market with Perth forecast to record the fastest dwelling price rises of between 14 to 19 per cent.
Brisbane is forecast to record strong dwelling price rises of between 9 to 14 per cent in what will be its 12th straight year of dwelling price increases.
In Melbourne, the bulk of the weakness over 2025 is likely to occur in the inner-city ring where SQM has been recording surges in distressed listings. However, given the underlying shortages in homes as has been recorded in the rental market, once interest rates are cut, SQM anticipates a quick rise in Melbourne buyer demand.
If interest rates were to remain at their current levels deep into 2025 it would be a very different scenario that played out across the country’s diverse property markets.
(Source: RateCity)
It has been a year since the RBA last changed the cash rate. The big four banks remain confident a rate cut will come early in the new year but the Reserve Bank of Australia (RBA) inflation forecasts ensure there is still plenty of cause to doubt that.
The RBA’s November monetary policy statement predicted headline inflationwill gradually decline from 3.8 to 2.8 per cent in June 2025, easing towards the RBA’s target band of 2-3 per cent before lifting out of the range with 3.7 per cent in December 2025, dropping back to 2.6 per cent by the end of 2026.
Those estimates do little to instil confidence the cautious RBA Board will leap into rate cuts if it sees inflation at 3.7 per cent by the end of next year.
Nor does the October inflation data released Wednesday (27 November) shift the dial. The RBA’s preferred trimmed mean inflation measure rose slightly last month from 3.2 per cent to sit at 3.5 per cent.
Were the RBA to hold out on rate cuts in 2025, SQM’s research paints a markedly less buoyant picture of the national property market.
SQM’s second most likely scenario is where interest rates are not cut at all over 2025 but population growth remains strong. Sydney, Melbourne, Canberra and Hobart housing prices are expected to fall further in such an event, however, Perth is still expected to record a strong market given the strength and momentum that is currently in place.
Louis Christopher, Managing Director of SQM Research said for 2025 they were not anticipating much of a change in current population trends but were anticipating a cut in interest rates starting from mid-year that would continue the price rise momentum in Perth, Brisbane and Adelaide and keep the price falls in Sydney and Melbourne to single digits.
“To be sure, our two largest capital cities, along with Canberra and Hobart will start 2025 off in the red; indeed, we are currently recording dwelling price falls in each of these cities.
“Current interest rate settings are biting the community more in these cities which on our measurements, are in overvalued territory and/or are experiencing slower economic growth compared to the cities (and states) that have enjoyed good economic growth through a buoyant commodities market and/or have had generous contributions from GST receipts.
“However, once interest rate cuts do occur, we are expecting a speedy bounce in demand for Sydney and Melbourne in particular, which both are still experiencing underlying housing shortage relative to the strong population growth rates.
“This may well mean there is a good window for buyers at this time for our two largest capital cities.
“If rate cuts do not occur in 2025, it is unlikely a recovery will occur in Sydney and Melbourne at any time next year,” Mr Christopher said.
Article Q&A
What will property prices do in 2025?
Sydney and Melbourne housing prices are predicted to continue to record moderate housing price falls of between 1 to 5 per cent, while Canberra was the market to avoid with expected price falls of 2 to 6 per cent. Perth, Brisbane, Adelaide and Darwin are expected to outperform the national housing market with Perth forecast to record the fastest dwelling price rises of between 14 to 19 per cent.
What will happen to property prices do if interest rates remain steady?
SQM’s second most likely scenario is where interest rates are not cut at all over 2025 but population growth remains strong. Sydney, Melbourne, Canberra and Hobart housing prices are expected to fall further in such an event, however, Perth is still expected to record a strong market given the strength and momentum that is currently in place.
There’s a gaping chasm between the proportion of income that is deemed comfortably manageable and the amount the average Australian is actually spending.
Summer is when there is heightened activity in the property markets and many buyers are taking their leap into property ownership.
This time of year also brings many other expenses and Christmas spending can take a toll on the household budget.
If you’re looking to buy a home this summer, you’re probably wondering how much of your take-home income should you be allocating to your mortgage.
A widely accepted benchmark for mortgage repayments is about 30 per cent of your household income. When it comes to financial stability, the higher the percentage above 30 per cent is when financial pressures and mortgage stress starts to limit your spending.
Mortgage stress will occur when you start to feel limited for spending on necessities like groceries and unexpected health expenses.
Take this 30 per cent as a guide, but not a set rule. There are other factors that will contribute to affordability, such as location, household size and lifestyle that will determine how much you can comfortably afford.
The latest Real Estate Institute of Australia Housing Affordability Report revealed Australians are now typically spending a deeply concerning 48 per cent of their household income on their mortgage repayments.
This equates to an Australian average monthly home loan repayment of $3,926 for the average home loan, which is $636,209.
When we drill down by location, New South Wales raises the bar with an average of $4,760 per month for mortgage repayments and an average home loan of $771,422, followed by Victoria at $3,806 per month for an average home loan of $616,877, and third are Queensland homeowners who are paying $3,727 per month for an average home loan of $603,988.
Mortgage stress and lifestyle
To understand why mortgage repayments and the percentage of income is so important, we must consider how this impacts daily life. According to the Australian Bureau of Statistics (ABS) the average monthly costs for Australian households are:
Groceries
The average Australian household spends approximately $600 to $1,000 per month on groceries, depending on the household size and dietary preferences.
Entertainment and leisure
Australians spend around $200 to $500 per month on entertainment, which includes dining out, streaming services, movies and recreational activities. This category often sees cutbacks when households experience financial strain.
Utilities and transportation
Utilities (electricity, gas, water): $300–$500 per month
Transportation (fuel, public transport): $400–$800 per month
Savings and miscellaneous costs
Households are encouraged to allocate 20 per cent of their income to savings or emergency funds, which is roughly $1,667 per month for a household earning $100,000 annually.
So, how do you know if you are at risk of mortgage stress:
The main signs of mortgage stress will appear over time and can include:
Falling behind on mortgage repayments
Relying on credit cards or loans for daily expenses
Neglecting bills or other financial obligations
Experiencing high levels of anxiety about finances
Mortgage stress is a common challenge for Australian households, but it can be managed with proactive planning and smart financial habits.
By keeping mortgage repayments within 30 per cent of gross income, understanding household budgeting, and implementing strategies to avoid or mitigate stress, can safeguard financial health and secure long-term stability.
Eight tips to manage the household finances
Set a realistic household budget
Knowing your budget and upcoming expenses can really combat overspending. Your detailed budget should include mortgage repayments, fixed costs (utilities, insurance) and variable costs (entertainment, groceries). By tracking where you spend money, you will be able to identify where to cut back.
Know your repayments
Speak to a mortgage broker to understand all your borrowing options because borrowing within your means is crucial. The loan amount should be comfortable to repay and allow you to maintain financial flexibility even if interest rates rise, you have unexpected expenses, or your income decreases.
Put money aside in an emergency fund
Putting aside at least three to six months’ worth of living expenses can help you overcome any unexpected financial challenges, such as job loss or medical emergencies.
Refinance your mortgage
If interest rates fall or your credit profile improves, consider refinancing your mortgage to secure a lower interest rate or extend your loan term to reduce monthly repayments. This can also be achieved if you’ve been with the same lender for many years and have been a good customer.
Increase your income
If you are unable to reduce expenses, you might be able to explore increasing your income. Investigate whether you can create any additional income streams, such as freelance work, a part-time job, or renting out a spare room.
Seek professional advice
A financial advisor or mortgage broker can help you restructure your debts, negotiate with lenders, and identify cost-saving opportunities.
Cut back on non-essential expenses
Reduce spending on entertainment, dining out, and luxury items. This can free up cash for mortgage repayments without compromising your essential needs. Consider your subscriptions like Netflix, Stan, Foxtel, etc and consider what you could do without.
Utilise the benefits of offset accounts
An offset account linked to your mortgage can reduce the amount of interest you pay, potentially saving you thousands over the loan term.
Article Q&A
What are eight tips to manage household finances?
To avoid mortgage stress, borrowers should set realistic budgets, understand their repayment commitments, create an emergency fund, look at extra income avenues, consider refinancing, get professional advice, cut expenses, and utilise an offset account.
How much is the average Australian spending on their mortgage?
The latest Real Estate Institute of Australia Housing Affordability Report revealed Australians are now typically spending a deeply concerning 48 per cent of their household income on their mortgage repayments. This equates to an Australian average monthly home loan repayment of $3,926 for the average home loan, which is $636,209.
Whether it’s a new or refinanced home loan, or the need to fund a major renovation project, well informed decision making can make or break the success of the property investment, writes Helen Avis, Director of Finance, Specialist Mortgage.
There’s a lot more to a home loan than just the interest rate.
The features of the loan can also have a big impact on your total mortgage costs and repayment flexibility, which is why it’s important to understand the potential benefits of a redraw facility and an offset account.
Redraw and offset have one thing in common – they reduce the amount of interest you get charged. If, for example, you have $500,000 outstanding on your loan and $40,000 in either redraw or offset, you’ll be charged interest on only $460,000 (i.e. $500,000 minus $40,000).
But there are subtle differences between the two features, according to Helen Avis, Director of Finance, Specialist Mortgage, who has just won her fourth successive WA/NT Broker of the Year Award at the Specialist Finance Group’s 2024 National Awards.
Redraw loan facility
Redraw is a facility that sits within your loan. The way you accumulate money in redraw is by making extra home loan repayments. The lender will allow you to borrow back (or redraw) these extra repayments, subject to certain conditions. But because this money belongs to the lender, it’s technically possible the lender might decide one day not to allow you to reclaim the money, or change the conditions of redraw.
Offset accounts
Offset is a separate transaction account that’s linked to (but separate from) your home loan account. The way you accumulate money in offset is through deposits – for example, salary payments. The money in your offset belongs to you, so the lender can’t prevent you accessing it.
Overall pros and cons
Pros: you can use redraw and offset to reduce your interest bill and pay off your home loan sooner.
Cons: your lender may charge you a higher ongoing fee or higher interest rate to access these loan features. Also, you may be charged a fee for each redraw transaction.
Financing renovations
Renovations are incredibly popular, with homeowners investing $2.84 billion on alterations and additions in the June 2024 quarter, according to the Australian Bureau of Statistics.
Typical costs range from about $2,000 to $5,000 for bedrooms, $15,000 to $30,000 for bathrooms and $25,000 to $50,000 for kitchens, according to JDL Constructions.
Helen Avis’ financing tips:
Here are three ways to finance your renovations:
Take out a construction loan. With a construction loan, the funds will be distributed in stages throughout the project, rather than in an upfront lump sum, and you’ll be charged interest only on the funds you’ve already received. Your construction loan will be interest-only during the building phase and will then revert to a standard principal-and-interest home loan once the building has been completed.
Take out a personal loan. Compared to a construction loan, the application process is likely to be faster and your chance of approval is likely to be greater, but your interest rate is likely to be higher as well.
Pay cash. This is the simplest option. If you’re thinking about paying for the renovations with a credit card, be careful. While you will not have to go through an application process, the interest rate will be extremely high and could leave you susceptible to falling into a debt trap.
Article Q&A
What is a loan redraw facility?
Redraw is a facility that sits within your loan. The way you accumulate money in redraw is by making extra home loan repayments. The lender will allow you to borrow back (or redraw) these extra repayments, subject to certain conditions. You can use it to reduce your interest bill and pay off your home loan sooner.
What is an offset account?
Offset is a separate transaction account that’s linked to (but separate from) your home loan account. The way you accumulate money in offset is through deposits – for example, salary payments. The money in your offset belongs to you, so the lender can’t prevent you accessing it. You can use it to reduce your interest bill and pay off your home loan sooner.
What is the best way to finance a home loan renovation?
Helen Avis, Director of Finance, Specialist Mortgage, advises borrowers financing a renovation project to take out a construction loan or personal loan but to assiduously avoid using a credit card.
The hottest property markets in Australia are not spelt in capitals; it’s regional real estate that is outperforming the nation’s major cities, but where are the real hotspots?
From Geraldton to Townsville, regional property markets have outperformed the capital cities over the past three months.
The gains were driven by strong growth in the mining towns of Western Australia and Queensland, with quarterly price gains strongest in Mackay (8.3 per cent), followed by Geraldton, up 8.2 per cent, and Townsville, up 6.6 per cent.
Geraldton also recorded the strongest annual increase with dwelling values up 28.7 per cent over the year to October, adding more than $100,000 to the median value. Queensland’s Gladstone and Townsville also recorded significant annual growth of 27.2 per cent and 26.9 per cent respectively.
While sales activity was broadly losing momentum, Geraldton and Gladstone were again the standout performers, recording an increase in their annual sales volume of 44.2 per cent and 34.3 per cent, respectively.
Dwelling values in regional areas rose 1.1 per cent over the three months to October, exceeding the 0.8 per cent growth recorded in capital cities.
(Source: CoreLogic)
Kaytlin Ezzy, CoreLogic Australia economist and author of the CoreLogic Regional Market Update released Wednesday (27 November), said Queensland and Western Australia regions continued to dominate the top-performing- lists, taking out the top eight spots for quarterly value growth areas.
“Regions like Mackay, Geraldton, and Townsville are seeing exceptional growth, driven by affordability advantages compared to our major cities, as well as lifestyle appeal,” Ms Ezzy said.
“This will have contributed to the strong demand but even with the impressive growth, for those with the capacity to service a mortgage, they still remain attainable with medians less than $600,000.”
Conversely, across Australia’s largest 50 non-capital city Significant Urban Areas (SUAs), seven out of eight Victorian SUAs and 10 out of 21 NSW SUAs saw values fall over the three months to October.
The holiday town of Batemans Bay, on NSW’s south coast, recorded the largest decline, down 2.7 per cent over the quarter, followed by Victoria’s coastal city of Warrnambool, down 2.6 per cent.
Rents are also still inching upwards in the regions (0.5 per cent over the quarter), whereas they were unchanged over three months in the combined capital cities. Albany led the way for quarterly rental growth (3.0%).
The Kalgoorlie–Boulder region continued to record the highest gross rental yields among the largest regional Significant Urban Areas (SUAs), at 8.8 per cent, despite yields falling 70 basis points from a recent peak in March (9.5 per cent). Similarly, the Bowral–Mittagong region in NSW continued to record the lowest gross rental yields at 3.2 per cent, with yields expanding 20 basis points over the same period.
Over the year, 10 markets in NSW and Victoria fell in value, with Ballarat recording the largest fall at of 6.3 per cent, followed by the St Georges Basin–Sanctuary Point region in NSW, and the Warragul–Drouin region in Victoria, both down 3.9 per cent over the year.
Ms Ezzy said the downturn in regional coastal and lifestyle areas of Victoria and NSW partially reflects their strong performance during Covid, when demand surged for affordable lifestyle markets and more space.
“While these markets thrived during the early stages of Covid, reduced affordability and a range of headwinds have since softened conditions,” she said.
“There’s certainly been a slowdown in demand for these areas and more stock on the market and that’s in addition to higher interest rates, cost of living pressures, and limited borrowing capacity.”
API Magazine’s recently released quarterly property sentiment report found there was a renewed expectation that property prices in the regions would continue to rise over the next 12 months.
(Source: API Magazine Property Sentiment Report Q3 2024)
After falling 13 percentage points the previous quarter, most of that drop was recovered, with 64 per cent respondents now expecting prices to rise. This is the second highest ratio in the nine quarters this metric has been measured.
Issues with regional relocations
While the figures point to the regions broadly enjoying economic strength, the volume of people moving from the cities to regions is creating housing pressures that are escalating.
Real Estate Institute of Australia (REIA) President, Ms Leanne Pilkington, said the latest data revealed that the number of city-dwellers considering a move to regional areas has doubled over the past 18 months.
Citing the Year 2 Progress Report by the Regional Australia Institute (RAI), she said there was an urgent need to address key pressure points, particularly housing availability and affordability, to support regional communities.
“The persistently low regional rental vacancy rates, which remain well below the three per cent threshold for balanced rental markets, highlight the ongoing housing supply challenges in these areas.
“Regional areas have also experienced a sharper increase in house prices compared to capital cities, with prices rising by 54.2 per cent from March 2020 to December 2023, compared to 29.3 per cent in urban centres,” she added.
REIA partnered with the RAI and Master Builders Association earlier this year to host the National Regional Housing Summit, where nearly 300 delegates gathered in Canberra and online to address these critical issues.
Ms Pilkington said the recent National Regional Housing Summit in Canberra reinforced that regional Australia requires bespoke solutions that cater to the unique market dynamics of each community.
“REIA’s policy positions include governments creating conditions for more dynamic regional rental markets, including significant investment in social and affordable housing, increasing housing supply and diversity and ensuring a steady pipeline of development-ready land is vital to meet demand.”
Ms Pilkington said the Australian Government’s recent housing programs, including the Housing Australia Future Fund, are positive steps but currently lack a specific allocation for regional areas.
Article Q&A
Are property prices rising fastest in the capital cities or regional areas?
From Geraldton to Townsville, regional property markets have outperformed the capital cities over the past three months. Dwelling values in regional areas rose 1.1 per cent over the three months to October, exceeding the 0.8 per cent growth recorded in capital cities.
Where are regional property prices rising the quickest?
The gains were driven by strong growth in the mining towns of Western Australia and Queensland. Quarterly price gains were strongest in Mackay (8.3 per cent), followed by Geraldton, up 8.2 per cent, and Townsville, up 6.6 per cent.
Are rents still rising in regional Australia?
Rents are still inching upwards in the regions (0.5 per cent over the quarter), whereas they were unchanged over three months in the combined capital cities.
Where are the best rental returns in Australia?
Albany in Western Australia’s southwest led the way for quarterly rental growth (3.0%). The state’s Kalgoorlie–Boulder Goldfields region continued to record the highest gross rental yields among the largest regional Significant Urban Areas (SUAs), at 8.8 per cent, despite yields falling 70 basis points from a recent peak in March (9.5 per cent).
National property prices are now almost flatlining, with the pace of growth slowing in the strongest markets and going backwards in Sydney and Melbourne.
The property boom that has been underway in Australia for two years is all but over.
In the weakest result since January 2023, dwelling values on a national basis eked out a 0.1 per cent gain in November.
The latest CoreLogic Home Value Index (HVI) reaffirmed the downward trend in property prices around the country.
The three cities that have been the powerhouse of capital growth – Perth, Adelaide and Brisbane – are still generating reasonably strong price growth but momentum is subsiding.
The country’s two biggest markets, Sydney and Melbourne, are now settling firmly into a slow price decline, with Hobart also sliding in the past month.
(Source: CoreLogic)
Perth’s pace of capital gain continues to lead the nation, with values up 1.1 per cent over the month and 3.0 per cent higher over the rolling quarter, however, this was the softest rise over a rolling three-month period since April 2023 and is less than half the rate of growth recorded through the June quarter (6.7 per cent).
Similarly, Brisbane’s quarterly rate of growth has eased back to 1.8 per cent, the slowest pace of gains since March 2023, while Adelaide’s 2.8 per cent rise in values over the past three months was the smallest outcome since June 2023.
Buyers who were holding out for an interest rate cut have seemingly put the wallets and purses aside as the prospects of an imminent cut to the official cash rate recede.
That was underlined on Friday (29 November) when ANZ become the third of the four big banks to push their expectations of a rate cut back from February to May 2025.
A rate cut in early 2025 would likely reignite property prices and drive affordability further out of reach of many but the current downward pressure on prices now appears to have little opposition even in the face of limited housing supply.
The money that had been pouring into the property market is now being squirreled away.
Household deposits hit another record high in October, according to RateCity.com.au data released Friday, with Australians saving an extra 19.5 billion in that month alone.
The correlation between interest rates and savings, and by extension its effect on property price pressure, has been made clear over the past couple of years. Household bank deposits have now risen by $272.6 billion since the start of the rate hikes (April 2022 to October 2024 inclusive).
Listings on the rise
Buyers are now enjoying more choice, with listings on the rise around the country.
Capital city unit and house listings are up 16 per cent since the end of winter, with Perth (33 per cent) and Adelaide (25 per cent) recording the largest lift in advertised stock levels through the spring season, albeit from an extremely low base, with total listings remaining well below average in these cities.
Sydney and Melbourne listings are now tracking 10.4 per cent and 9.1 per cent above their previous respective five-year averages, to be at their highest level for this time of the year since 2018.
Median selling times are also trending higher for private treaty sales.
Regional property has reinforced its outperformance of the capitals in the latest HVI.
Outside of the capitals, regional housing trends have been a little stronger, with the combined regional index rising 1.1 per cent over the past three months compared with a 0.3 per cent lift across the combined capitals.
As with the capital city trends, there is significant diversity, with regional Victoria weighing on the headline numbers, down 0.9 per cent over the rolling quarter, while every other ‘rest of state’ region continued to record a mild rise, led by regional WA up 3.3 per cent.
Real estate prices still have some factors preventing a more rapid deceleration.
Tim Lawless, CoreLogic’s Research Director, said an undersupply of newly built housing is likely to provide some support for housing values.
“Although population growth is expected to ease further in 2025, a cumulative undersupply of housing has accrued across Australia following the record levels of population growth since international borders re-opened.”
The unemployment rate has levelled out in the early 4 per cent range over the past seven months, with participation in the workforce holding around record highs and under-employment trending lower.
“While strong labour markets are a welcome outcome for most Australians, the risk in a tight jobs market could keep additional upward pressure on wages that could in turn fuel consumer spending, supporting higher housing prices.
International buyers have more to spend
Australian buyers are now also looking for bargains.
The fastest growing property markets have predominantly been driven by hot demand in the outer suburbs and findings released Friday support the perception this is set to continue.
The most common maximum price for Australian searchers when looking to buy on realestate.com.au is $600,000.
International buyers looking to Australia seemingly have their eyes on a pricier prize, in part due to Australia’s low dollar valuation.
The most searched top price band for overseas searchers is $1 million, according to PropTrack, which is reflective of the suburbs that get the most search activity from overseas.
Some of the cities frequently searched have more moderate prices, such as Brisbane, Perth, and Adelaide; however, suburbs such as Brighton, South Yarra, and Camberwell, all in Melbourne, which are popular with overseas buyers, are all in the pricier range.
This trend is similar for overseas property seekers looking to rent. Aside from the major CBDs, renters are interested in South Yarra, Bondi, and Manly, to name a few.
Of the countries with the largest search numbers, searchers from India have a smaller budget, mostly searching for properties below $600,000.
This is reflective of many of the suburbs they search for, preferring new development suburbs such as Tarneit and Point Cook, which have reasonably priced new homes for sale.
Building Or Undertaking Major Renovations On Your Home?
Or are you an Aussie expat looking to build or renovate your existing property in Australia? A construction loan might be just what you need. Unlike standard loans, construction loans allow you to pay for each stage of the build without needing all the funds upfront.
How Construction Loans Work In Australia
Construction loans, also known as building loans, are designed for individuals who are either building a new home or making significant structural changes, like adding a room or changing the roof, to an existing home. These loans offer flexibility by allowing you to draw down progress payments throughout the build or renovation.
A Mortgage With Draw Down Progress Payments
A significant feature of construction loans is the ability to draw down your loan in instalments during the construction process. This means you’ll receive the loan amount in stages rather than as a lump sum. Typically, these stages include the deposit, foundation works, framework, lock-up, fixing (plumbing and electrical), and completion.
This staged payment approach means you only draw down the amount needed to pay your builder and contractors as they complete each stage. Consequently, you are only charged interest on the amount drawn down, not the total loan amount. The principal loan amount does not need to be repaid until after construction is complete, which can help manage cash flow throughout the project.
Fixed Price Contract Australian Home Builds
Construction loans are generally based on a fixed price contract, whether you’re building on new land or renovating an existing property. This contract means there’s limited room for change once the building or renovations are underway.
Typically, the loan is interest-only during the construction period and transitions to principal and interest payments once the project is completed. You may be able to negotiate to extend the interest-only term, so it’s worth discussing this with your lender if it appeals to you.
If changes are needed during the build, discuss these with your lender as they can affect forecast costs. It’s wise to account for potential changes when applying for the loan, as variations are common in construction and renovation projects.
How to Apply For An Australian Property Construction Loan
To apply for a construction loan, you’ll need to provide your lender with council-approved building plans and a fixed price building contract from a registered builder. Usually, a deposit of 10%-20% of the total cost is required, and if your deposit is less than 20%, you might need to pay Lenders Mortgage Insurance.
Having a licensed builder increases your chances of loan approval, though you can apply as an owner-builder, which involves more paperwork and a longer process. A valuer may visit during construction to ensure the project is on track. Based on their report, the lender will continue payments or address any issues.
Be aware of key dates, such as when the build must be completed (Eg: within 24 months from the first drawdown). Keep your lender informed of any delays to discuss timeline adjustments.
Once construction or renovations are complete, you’ll need to provide final paperwork, such as the builder’s final invoice, building insurance policy, and certificate of occupancy.
Navigating the building and renovating process can be stressful, but we at Specialist Mortgage are here to help. Contact us today to learn how we can assist you with securing a construction loan, or any Australian home, and guide you through the process to make your dream home a reality.
Everything you need to know about The First Home Super Saver Scheme (FHSS)
We’ve got great news for Australian first home buyers looking to buy their first home down under! The First Home Super Saver (FHSS) scheme allows you to use some of your eligible voluntary Superannuation contributors towards buying your first home. You can withdraw up to $15,000 of your voluntary contributions from any one financial year, up to a total of $50,000 across multiple years, plus associated earnings.
Here’s what you need to know about the enhanced FHSS scheme and how it can benefit you.
Understanding the First Home Super Saver Scheme
The FHSS scheme allows first-home buyers to save for their deposit through their superannuation, reducing taxable income in the process. From 1 July 2022, the maximum amount you can release under this scheme increased from $30,000 to $50,000.
How Does FHSS Work?
Under the FHSS scheme, you can make voluntary super contributions of up to $15,000 each financial year to save for your first home. These contributions can come from your salary or savings. The significant advantage here is that these contributions are taxed at only 15%, which is generally lower than your marginal tax rate, potentially allowing your savings to grow faster than in a regular bank account.
Additionally, a percentage of the earnings from your contributions is included when calculating how much you can withdraw through the FHSS. This figure is determined by the Australian Taxation Office (ATO), not your super fund.
Here’s how it works in practice:
If you salary sacrifice $15,000 annually for three years ($45,000 total), and the ATO calculates that you earned $5,000 from that investment, you can then apply to release the full $50,000 amount.
For couples, each partner can save within their individual super accounts, potentially allowing for a combined FHSS release of $100,000.
If you opt to salary sacrifice $10,000 a year, you might need four to five years to reach the $50,000 cap, or you can access a lower amount sooner.
Tips from the experts:
– Maximise Contributions: Consider increasing your voluntary super contributions to reach your savings goal faster.
– Monitor Super Earnings: Keep track of your superannuation earnings to better estimate your potential FHSS release amount.
Eligibility for the FHSS Scheme
To participate in the FHSS scheme, you must be 18 or older and have never owned property in Australia. Eligibility is assessed individually, meaning each participant can use their own FHSS contributions toward the same property, even if buying with someone who already owns property.
Get ahead, quicker:
– Check Eligibility Early: Confirm your eligibility before starting the FHSS process to avoid any delays.
– Plan Joint Purchases: If buying with someone else, ensure that all eligible parties maximise their FHSS contributions.
Getting Your Funds in Time for Settlement
Timing is crucial to ensure your funds are released in time for property settlement. The ATO process can take some time, so start the FHSS process early, ideally when you first apply for home loan pre-approval. Allocate at least six weeks for each step.
Steps for success:
Apply for FHSS Determination: Request a determination from the ATO using your MyGov account. The ATO will calculate and confirm the amount you can release.
Request Funds Release: Once you have the determination, request the release of your funds through MyGov as soon as possible.
Ensure you receive your FHSS determination before signing any property contract. The ATO website provides detailed conditions for releasing money under the FHSS scheme.
– Early Application: Apply for your FHSS determination as soon as you start considering property purchases.
– Track Timelines: Keep a timeline of key dates and deadlines to ensure a smooth release and settlement process.
One-Time Use and Time Limits
You can only use the FHSS scheme once. From the date you make a valid release request, you have up to 12 months to sign a property contract and notify the ATO.
Make sure to:
– Plan Ahead: Have a clear timeline and plan for when you intend to purchase property.
– Stay Informed: Regularly check for updates on the FHSS scheme and ATO requirements.
The FHSS scheme can be a powerful tool to help you save for your first home deposit faster than a regular savings account, and it can help you pay less tax. We’re here to help you manage the timelines and rules involved, ensuring your funds are released in time for settlement.
By understanding and leveraging the FHSS scheme, you can make the most of your savings and achieve your dream of homeownership sooner. If you’re considering using the FHSS scheme or want to know how it can help you own your first home sooner, please give us a call.
When planning to buy property in Australia, you’ll find yourself juggling numerous numbers:
the deposit you’re saving, your borrowing capacity, closing costs, your total budget, and anticipated monthly repayments. Amidst all these figures, it’s easy to overlook a critical number – your credit score.
If you’re diligently tracking all your other numbers but unsure about your credit score, you’re not alone. Approximately 80% of credit-active Australians are unaware of their credit score. Yet, this figure is crucial, especially if you’ve faced challenges in paying bills or meeting repayment deadlines.
The Significance of Your Credit Score when trying to get an Australian Home Loan
Your credit score is a number between zero and either 1000 or 1200, depending on the credit reporting agency. Lenders use this figure to assess whether to grant you credit or a loan, determine the amount to lend, and set the interest rate. Essentially, lenders prefer offering better deals to individuals less likely to default on their loans. A higher score increases your chances of approval and securing favourable terms.
How Is Your Credit Score Calculated?
Your credit score is derived from the financial and personal information in your credit report. An algorithm processes various variables to generate your score, considering factors like:
– Your overall debt and how you manage it
– The number of loan applications you’ve made
– Your credit cards and current credit limits
– Accounts you’ve opened or closed
Credit reports also detail any financial hardship arrangements, such as loan deferrals and reduced payments. Previously, these arrangements negatively impacted your credit score by showing you in arrears. However, under current regulations, as long as you adhere to the terms of any hardship arrangements, your credit score remains unaffected.
What’s Considered a Good Credit Score to obtain a favourable home loan?
Credit scores in Australia vary depending on the reporting system:
– For scores out of 1200: Above 853 is excellent, while above 661 is good.
– For scores out of 1000: Above 690 is excellent, while above 540 is good.
How to Improve Your Credit Score
If your credit score isn’t where you’d like it to be, there are steps you can take to improve it. Begin by obtaining your credit report to check for errors and report any inaccuracies to the credit reporting agency, providing necessary documentation.
Top tips for boosting your score right now!
– Lower Your Credit Card Limit: Reducing your available credit can positively impact your score.
– Limit Credit Applications: Multiple credit applications can negatively affect your score, so apply sparingly.
– Timely Payments: Ensure you pay your rent or mortgage and bills on time.
– Manage Existing Loans: Pay off existing loans, including credit cards, promptly each month and try to pay more than the minimum amount due.
Taking the First Step to improving your score
The first step to improving your credit score is to request your credit report. Monitoring this important number can help you understand your financial standing and take necessary actions to improve it and help you get an Australian home loan.
Get Expert Advice From A Trusted Advisor
If you’d like to discuss how to position yourself for the best mortgage deal, please give us a call. At Specialist Mortgage, we’re here to guide you through every step of securing an Aussie home loan, ensuring you’re in the best possible position to achieve your property goals.
