Buying still possible despite hiking property prices
Australia’s house price growth may have slowed for now, but price growth will resume – with some analysts predicting median house prices in Sydney, for example, of more than $1 million within the next few years.
The conclusion of the beefed up first home owner grant and a steady rise in mortgage rates have taken most of the heat out of the nation’s property market over the past couple of quarters.
But this is part of the natural ebb and flow of the property cycle and experts are expecting Australian house prices to continue to average strong growth in the years ahead.
According to Australian Property Monitors, Sydney’s inner city region is set to achieve average annual growth of 7.6 per cent over the coming decade, reaching a median property price of $1.2 million within the same period.
For first home buyers this may sound a little scary. I’d imagine you’re already doing the math? What is 20 per cent of $1.2 million? That’s $240,000 – and a sizeable (and unrealistic for many first home buyers) sum to save for a first home deposit.
But don’t get too worked up – the median house price is actually the middle price in a series of prices, which means half of all house prices are in fact below the median.
Furthermore, while a tidy deposit will always help first home buyers get ahead, it is possible to enter the property market with less than a 20 per cent deposit.
Lender’s mortgage insurance (LMI) allows first home buyers to borrow up to 95 per cent of the value of the property. It works by lenders passing on the risk of lending more than 80 per cent to a mortgage insurer, such as Genworth Financial or QBE LMI.
There is of course a cost – the LMI premium – but this can be capitalised into your regular loan repayments, meaning it is hardly noticed and you can secure the property you want, sooner.
Not all lenders are willing to offer 95 per cent loans but if you want to find out more visit a mortgage broker. They’ll be able to tell you which lenders are able to lend you up to 95 per cent as well as explain more about how LMI works.