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According to Money.com.au, a “record number” of Australian suburbs have hit the million-dollar price tag mark for home prices.
Research from the company revealed that a household looking to secure a $1 million loan with a 10 per cent deposit would need a pre-tax income of about $187,000. This includes lender’s mortgage insurance (LMI) added to the loan.
For a couple, this works out to be around $93,500 per applicant. The average wage in Australia, according to SEEK is $98,000 annually. However, the median yearly wage is just $65,000. A far cry from the almost $100,000 needed to secure one of these properties.
For those aiming to save a 20 per cent deposit ($200,000) and avoid LMI, the minimum household pre-tax income required would be $165,000, or $82,500 per applicant, said Money.com.au. While a little easier, it still is out of reach for many across the country.
For those unable to reach the million-dollar property price tag, borrowing within the individuals means is important, said Money.com.au’s home loans expert Mansour Soltani.
“Million-dollar homes in Australia are quickly becoming the norm. While you don’t need an enormous salary to buy a $1 million property, you do need a larger deposit compared to buying a cheaper home. Saving for a deposit at this price point is the real mountain to climb for many buyers – often more challenging than managing the ongoing mortgage repayments,” he said.
“You also don’t need to get swept up in the buying frenzy – sometimes the smarter move is choosing a less-fashionable suburb or a more modest home under $1 million to avoid overextending your finances.”
According to Soltani, a general “rule of thumb” is for every $100,000 someone earns, they can potentially borrow up to five times that amount, depending on their financial situation and the lender’s criteria.
He noted that prices are likely to rise, and entering the property market may become more difficult, emphasising how important it is to do your research and take advantage of the other avenues available.
“Depending on where you are in Australia, if history is any guide, when rates drop, prices tend to rise, widening the gap between the haves and have-nots. In other words, entering the property market is only going to get harder for the have-nots,” Soltani said.
“Take advantage of available government grants, and if that’s not an option, consider exploring other investment classes with lower entry costs to grow your savings and hedge against inflation. Over time, this could help you save enough for a 5–10 per cent deposit, whereas saving without a strategy may see your money lose value against inflation.”
Related: Affordable housing demand gaining momentum
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