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Where you can still afford a house near the city on an average salary

Australians on average salaries can still buy a house near the city if they are prepared to compromise – and even get in with a five per cent deposit.

While a Sydney house in a middle-distance suburb is unattainable for a full-time worker earning $90,917, in Brisbane and Melbourne it’s still possible to buy a home, with a backyard, relatively close to the central business district without having to live in an apartment.

The banks are willing to approve loans with debt-to-income ratios of more than six – the level the Australian Prudential Regulation Authority deems to be the stress threshold.

That means an average, full-time worker can borrow $545,000 to buy a $680,000 house.

Under the federal government’s Home Guarantee Scheme, supported by Labor, a first-home buyer on that kind of budget could purchase a house with a five per cent deposit of just $34,000, instead of having to save up $136,000 for the usual 20 per cent deposit to avoid having to pay mortgage insurance.

That’s if they manage to successfully apply for one of 35,000 places available for first-home buyers from July 1, 2022.

Buyers though would need to factor in a June interest rate rise – the first since November 2010 – that would see their monthly mortgage repayments rise by at least $100. 

Australians on average salaries can still buy a house near the city if they are prepared to compromise – and even get in with a five per cent deposit. Hemmant, 10km east of Brisbane’s city centre has a median house price of $800,342, based on CoreLogic data. But a smaller two-bedroom house (pictured) is on the market for $599,000

Zillmere, 13km north of Brisbane's CBD, has a mid-point house price of $750,790. This suburb, however, has a house (pictured) on the market for $575,000, which is now under offer

Zillmere, 13km north of Brisbane’s CBD, has a mid-point house price of $750,790. This suburb, however, has a house (pictured) on the market for $575,000, which is now under offer

The 5 per cent deposit thresholds by city for Home Guarantee Scheme from July 1

BRISBANE: $700,000 which means saving up for $35,000 instead of $140,000

MELBOURNE: $800,000 which means saving up for $40,000 instead of $160,000

SYDNEY: $900,000 which means saving up for $45,000 instead of $180,000

Hemmant, 10km east of Brisbane’s city centre has a median house price of $800,342, based on CoreLogic data.

But a smaller two-bedroom house is on the market for $599,000.

Zillmere, 13km north of Brisbane’s CBD, has a mid-point house price of $750,790.

This suburb, however, has a house on the market for $575,000, which is now under offer.

Both houses were priced well below greater Brisbane’s median house price of $856,731, following a 32.1 per cent increase in the year to March.

They are also within the $700,000 threshold of the federal government’s Home Guarantee Scheme, where a first-home buyer in Brisbane can get into the property market with a five per cent deposit.

The taxpayers would underwrite the rest of the 20 per cent mortgage deposit. 

That means a first-home buyer of a $600,000 home in these parts of Brisbane can get in with a five per cent deposit of just $30,000 instead of having to save up $120,000 for the usual 20 per cent deposit. 

Up to the $700,000 Home Guarantee Scheme threshold in Brisbane, a first-home buyer can qualify with a five per cent deposit of $35,000 instead of the traditional 20 per cent deposit of $140,000.  

In Melbourne, potential buyers have to go further out to afford a house within their borrowing limit.

In Melbourne, potential buyers have to go further out to afford a house within their borrowing limit. Broadmeadows, 22km north of the city centre, has a median house price of $632,907. A three-bedroom house (pictured), however, is on the market with a price guide of $500,000 to $550,000

In Melbourne, potential buyers have to go further out to afford a house within their borrowing limit. Broadmeadows, 22km north of the city centre, has a median house price of $632,907. A three-bedroom house (pictured), however, is on the market with a price guide of $500,000 to $550,000

Sydney and Melbourne house prices slip as other cities grow

SYDNEY: Down 0.1 per cent in March but up 20.6 per cent over the year to $1,403,154

MELBOURNE: Down 0.2 per cent in March but up 11.9 per cent annually to $999,037

BRISBANE: Up 2.1 per cent in March, up 32.1 per cent annually to $856,731

ADELAIDE: Up 2 per cent in March, up 28.7 per cent annually to $658,446

PERTH: Up 1 per cent in March, up 7.2 per cent annually to $568,108

HOBART: Up 0.3 per cent in March, up 21.9 per cent annually to $791,587

DARWIN: Up 0.7 per cent in March, up 7 per cent annually to $569,647

CANBERRA: Up 0.8 per cent in March, up 22.4 per cent annually to $1,055,812

Source: CoreLogic median house price data for March 2022 

Broadmeadows, 22km north of the city centre, has a median house price of $632,907.

A three-bedroom house, however, is on the market with a price guide of $500,000 to $550,000. 

St Albans, 16km north-west of Melbourne’s CBD, has a median house price of $724,966.

But a three-bedroom house is on the market for $620,000 to $680,000.

Both houses are priced well below greater Melbourne’s median house price of $999,037, following an annual increase of 11.9 per cent.

They are also well within the $800,000 cap of the Home Guarantee Scheme for first-home buyers in Melbourne.

Victorian first-home buyers at this threshold can qualify with a five per cent deposit of just $40,000 instead of saving up $160,000 for a 20 per cent deposit.  

Sydney buyers wanting a house on an average salary need to head 60km south-west of the city beyond Campbelltown to get anything vaguely within their budget.

At Airds, the median house price is $722,897 – about half Sydney’s mid-point of $1.403million following an annual increase of 20.6 per cent.

But a three-bedroom house is on the market for $645,000 to $695,000. 

This puts it well within the $900,000 Home Guarantee Scheme cap for Sydney first-home buyers.

At this limit, a first-home buyer can save up for a five per cent deposit of $45,000 instead of having $180,000 for a 20 per cent deposit. 

All new borrowers, taking on a variable mortgage, need to be aware the Reserve Bank of Australia is widely expected to raise the cash rate in June, which would mark the first increase since November 2010. 

St Albans, 16km north-west of Melbourne's CBD, has a median house price of $724,966. But a three-bedroom house (pictured) is on the market for $620,000 to $680,000

St Albans, 16km north-west of Melbourne’s CBD, has a median house price of $724,966. But a three-bedroom house (pictured) is on the market for $620,000 to $680,000

Westpac chief economist Bill Evans is now expecting a 0.4 percentage point – or 40 basis point – increase from the RBA in June, after the May 21 election.

‘We accept that there is a risk that the board would be concerned about such a large move at the beginning of the cycle with implications for confidence,’ he said.

‘A possibility might be for a more cautious 25 basis point lift in June to be followed by the 40 basis point move in July.

‘However, we anticipate that market and media expectations will shift towards a 40 basis point move over the next six weeks and the anticipated shock to confidence will be contained.’

On a $545,000 mortgage for an average-income earner, this would see see monthly mortgage repayments rise by $113 from $2,095 to $2,208 should the banks pass on a 40 basis point RBA rate rise in full.

That is based on a typical variable rate rising from 2.29 per cent to 2.69 per cent.

Westpac is expecting headline inflation in the March quarter to surge by 4.9 per cent –  the fastest annual pace since 2008. 

Even before Russia invaded Ukraine, Australia’s consumer price index in the December quarter grew at an annual pace of 3.5 per cent – a level higher than the RBA’s 2 to 3 per cent target. 

At Airds, the median house price is $722,897 - about half Sydney's mid-point of $1.403million following an annual increase of 20.6 per cent. But a three-bedroom house (pictured) is on the market for $645,000 to $695,000

At Airds, the median house price is $722,897 – about half Sydney’s mid-point of $1.403million following an annual increase of 20.6 per cent. But a three-bedroom house (pictured) is on the market for $645,000 to $695,000

The Home Guarantee Scheme thresholds in each state of Australia

SYDNEY, NEWCASTLE, WOLLONGONG, CENTRAL COAST: Cap of $900,000 in 2022-23 (up from $800,000) compared with $750,000 in regional New South Wales (up from $600,000)

MELBOURNE, GEELONG: Cap of $800,000 in 2022-23 (up from $700,000) compared with $650,000 in regional Victoria (up from $500,000)

BRISBANE, GOLD COAST, SUNSHINE COAST: Cap of $700,000 in 2022-23 (up from $600,000) compared with $550,000 in regional Queensland (up from $450,000)

PERTH: Cap of $600,000 in 2022-23 (up from $500,000) compared with $450,000 in regional Western Australia (up from $400,000)

ADELAIDE: Cap of $600,000 in 2022-23 (up from $500,000) compared with $450,000 in regional South Australia (up from $350,000)

HOBART, LAUNCESTON: Cap of $600,000 in 2022-23 (up from $500,000) compared with $450,000 in regional Tasmania (up from $400,000)

CANBERRA: Cap of $750,000 in 2022-23 (up from $500,000)

DARWIN, ALICE SPINGS, KATHERINE: Cap of $600,000 in 2022 (up from $500,000)

 

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