Want to buy a “cheap” house in Sydney? You’ll need $60K

Adam Smith 30 May 2017

Australian cash notes moneySydneysiders would need nearly $60,000 at a bare minimum to get into the housing market, research has revealed.

Analysis by CoreLogic has examined the cost of a 5% deposit and stamp duty across capital cities. CoreLogic researcher Cameron Kusher said he explored houses in the 25th percentile of price, reflecting the more affordable end of the housing market, and calculated the price of a deposit, stamp duty and transfer fees.

“It’s a common misconception that in order to purchase a home you need a 20% deposit. Whilst a 20% deposit is beneficial it is not a necessity. However, if you have a deposit of less than 20% most lenders will require you to pay lenders mortgage insurance (LMI). LMI can be paid up front or capitalised into the loan repayments,” Kusher said.

Kusher said the analysis did not make provisions for LMI costs but found that stamp duty and a 5% deposit for a 25th percentile property in Sydney would require $59,033 for houses and $52,733 for units. In Melbourne, stamp duty and a 5% deposit would require $24,023 for a house and $18,773 for a unit.

Why Sydney affordability is so bad

For buyers looking to avoid LMI, the task of saving a deposit is even more difficult. A Sydney house in the 25th percentile would require $158,9333 to cover a 20% deposit and stamp duty, while a unit would require saving $133,733. In Melbourne, buyers looking to cover a 20% deposit and stamp duty would have to save $95,273 for a house and $74,273 for a unit.

Kusher said entry into the housing market remains a challenge, even in cheaper areas of the market. He said it was unclear how affordability could be improved, absent a significant decline in house prices.

“The future onset for the housing affordability challenge over the coming years could potentially create greater social pressures where our youth may look to move away from the commercial hubs of Sydney and Melbourne because housing costs are too high. Added to this, businesses may find it increasingly difficult to attract young talent unless they offer opportunities in areas where housing is more affordable, both from a purchase and rental perspective,” he said.

Image: Shutterstock

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