House prices fall in July, but buyers still need to save six-figure deposits

The latest research from CoreLogic shows property prices across the country are falling at a rate comparable to the 2008 financial crisis. average of the previous five years.

First-time home buyers may be shocked to find that, despite the headlines, you may still need to save a six-figure deposit to get your foot on the property ladder and avoid lender mortgage insurance. .

Property values ​​may still be relatively out of reach for the average Australian, particularly at a time of rising cost of living pressures.

House prices fall in July

CoreLogic’s Home Value Index found that in July 2022 Australian home values ​​fell by 1.3% – the third consecutive month of decline. The largest month-on-month decline was in Sydney with a 2.2% drop, followed by Melbourne and Hobart, where values ​​fell 1.5%.

Interestingly, Perth, Adelaide and Darwin recorded value growth in July, at 0.2%, 0.4% and 0.5% respectively. However, in an era of rising interest rates, it is not uncommon for regions with higher house prices to see declines more immediately first.

Regional markets are also seeing declines in value, with the Regions Combined Index seeing its first monthly decline since August 2020 (down 0.8%). While regional markets “still outperform their capital counterparts,” according to CoreLogic, these numbers indicate they are also vulnerable to falling values.

CoreLogic Research Director Tim Lawless said: “Although the housing market has only been down for three months, the National Home Value Index shows the rate of decline is comparable to the onset of the Global Financial Crisis (GFC) in 2008 and the deep recession of the early 1980s.

“In Sydney, where the slowdown has particularly accelerated, we are witnessing the the biggest drop in value in almost 40 years,” he said.

That being said, the median home value in Sydney and Canberra is still over $1 million, with Melbourne not too far behind. The national median home value now sits at $816,659, meaning achieving Australia’s big dream of owning a property is no walk in the park for most, even with falling prices.

For ordinary Australians, the prices are still exorbitant

Although prices can drop quickly, they are still higher than they were before March 2020 – the start of the pandemic.

Tim Lawless said: “It is important to remember the context of these statistics. As national home sales fall from record highs, they are still 9.2% higher than the previous five-year average for this period of the year.

For homebuyers hoping to get a foot on the real estate ladder, the drop in values ​​of the past few months may not yet be large enough to make that dream achievable.

Potential buyers are also battling higher interest rates in an environment of rising inflation while trying to save a down payment. Rising interest rates mean the amount homebuyers could have borrowed before the April 2022 cash rate hike will be lower, as loan funds are now more expensive. And higher inflation means your ability to save is reduced because more of your income is spent on expenses, like groceries and fuel.

In fact, June’s RateCity research showed that a family earning $150,000 would have seen the most they could borrow from the bank for a mortgage reduced by more than $66,000 with the first two hikes alone. rate.

With even more rate hikes expected this year and inflation now expected to hit 7.75% by Christmas, first-time homebuyers might be waiting a little longer to feel the housing market has become more affordable.

Six-figure deposits required in all capitals

If you’re hoping to avoid paying expensive Lender’s Mortgage Insurance (LMI), homebuyers are recommended to save at least a 20% down payment. However, in today’s home loan market, that means saving a six-figure home deposit amid rising interest rates and rising inflation.

20% deposit required in capitals

Capital city Median housing value 20% deposit required
sydney $1,087,376 $217,475
melbourne $791,999 $158,400
Brisbane $781,850 $156,370
Adelaide $650,047 $130,009
Perth $560,020 $112,004
Hobart $723,066 $144,613
Darwin $506,860 $101,372
Canberra $925,973 $185,195
National $747,812 $149,562

Source: CoreLogic.com.au. Note: Does not include stamp duty.

If you’re the type of borrower hoping to avoid IMT and potentially qualify for more competitive home loans, saving a 20% down payment may better meet your goals. The latest CoreLogic housing median values ​​for July 2022 show that a 20% deposit in each equity requires saving a deposit between $100,000 and $220,000.

You can get approved for a home loan with just a 10% down payment, and also get approved with a 2-5% down payment if you qualify for government assistance programs. This might be a more affordable and realistic route to take in the current economic environment. However, without a government assistance program, you will still have to pay IMT, which can run into tens of thousands of dollars, depending on the value of the property.

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