Housing Prices In Australia

Owning your own home is the great Australian dream and it’s been part of our national psyche for generations. The idea of buying a home is daunting to a lot of people though, especially if you’re from the UK and looking to relocate Down Under. The similarities between the two nations are staggering, but when it comes to property, how does the Australian market compare to the UK, and what can you expect to pay for your mortgage?

Property Market

According to the most recent estimates from Australian Property Monitors, the median house price in Sydney has hit $812,000 (£449,652), more than 17 per cent growth over the year to June 2014. This was followed closely by Melbourne which grew by 10 per cent to $608,000 (£358,278) over the same period. From a whole market perspective, real estate prices are expected to continue to rise over the 2014 period, albeit at a slower expected growth rate of 4 per cent compared to around 10 per cent growth in 2013 (January figures from RP Data).

Despite the rapid increases in Australia’s house prices over the past few years, research from Fitch Ratings ‘Mortgage and Housing Outlook’ found that property here is still more affordable than in the UK in relation to average house price to income ratios. This is great news if you’re a serious UK property investor looking to buy a piece of the Australian dream.

Choosing A Property To Buy

If you are living overseas, you can use the services of a buyers agent to find a property in Australia. Better yet, a mortgage broker can refer you to one of the companies that locate properties approved by the Foreign Investment Review Board.

How Do Australian Interest Rates Compare To The UK?

Bank of England governor Mark Carney recently told the UK press that interest rates – which have remained at 0.5% since 2009 – are edging towards a rise. When? Probably in early 2015. Who knows? There is also nothing at all certain about how much they will rise by either. Meanwhile, in Australia, the Reserve Bank of Australia has officially left the cash rate on hold at 2.5% for over a year, a record low for Australia.

In addition, the four major banks of Australia recently made the decision to drop the 5 year fixed rate to 4.99% with some experts predicting this to drop even further as the banks continue their price war. In fact, as a non-resident, you may be able to lock in your rate five years for even less than 4.99% with some lenders.

You’ll find that the best discounts aren’t advertised – they’re all by negotiation. The banks with the best discounts change on a weekly basis due to new offers and changes in funding costs.

Who Gets The Best Discounts?

• If your loan is over $500,000 you may be able to negotiate a lower rate.

• If you have more than a 20% deposit then more lenders will compete for your loan.

• Apply with a bank that is aggressively trying to grow their market share.

• If you are a high income-earning professional such as a doctor, lawyer or accountant then you may be eligible for special interest rate discounts or even waived Mortgage Indemnity Guarantee (known as Lenders Mortgage Insurance in Australia).

Eligibility for a professional discount depends on how you present your situation to the lender. As always, the key to borrowing as an expat is to apply with the right lender.

Which Bank Is Right For You?

There’s no one bank that suits every new migrant. Many banks require migrants to have large deposits – usually over 20% of the property value. Most do not give discounts to migrants and won’t even accept particular visa holders.

A broker will identify your needs and then select two or three lenders for you to choose from so you can focus on finding the right home to buy.

Your Deposit

As a rough guide, you will need 5% of the purchase price to pay for purchasing costs including stamp duty (tax), legal fees and incidentals. You will also need to make up the difference between the mortgage and the purchase price.

For example, if you are borrowing 80% of the purchase price then you’ll need around a 25% deposit.

Risks You Need To Be Aware Of

If you are the winning bidder at an auction then you are committed to buying the property and paying your deposit. If you can’t complete the purchase then you may lose your deposit, which can be up to 10% of the purchase price.

You should arrange a pest and building inspection before you commit to buying a property. Termites are common in Australia and, in some areas, can affect up to a quarter of houses. If you are buying an apartment or townhouse then you can arrange a strata report to confirm that the building has been managed well. Ask your conveyancer or broker for a full list of precautions.

Why A Mortgage Broker Can Help

By working with a mortgage broker who specialises in home loans for temporary residents and 457 visa holders living in Australia, you can be sure you’re getting a good deal on your mortgage.

Many of the mortgage brokers at Home Loan Experts are successful property investors in their own right and understand the Australian property market.

Visit www.homeloanexperts.com.au for more info.