Key Points
- A new report has identified Australian suburbs where it’s possible to buy a home with a $50,000 deposit.
- Financial comparison site Canstar listed 150 areas it said were best to buy in with deposits of $50,000 or $100,000.
- That sort of money can secure a house in most cities or a unit in the more expensive ones.
The median value of a house in Australia has increased every month for the past 19 months, making it harder for people to buy property.
there are still opportunities for buyers with a deposit of $50,000.
That’s according to research agency and financial comparison site Canstar, which says it is possible to secure a house or apartment with a deposit of that amount.
How was the data collected?
Canstar’s Deposit Stars report, published in September, lists 150 suburbs it describes as the best areas to try to buy if you’ve got a deposit of $50,000 or $100,000.
But it’s not just the suburbs with the cheapest real estate listings that feature on the list.
Suburbs had to have had positive price growth in the past quarter, as well as infrastructure nearby and potential for rental yield growth.
Canstar’s data insights director Sally Tindall said people needed to be practical about what was going to suit their “ultimate goal, whether that’s living in it for a period of time or renting it out”.
Canstar data insights director Sally Tindall says buyers need to consider a number of factors when looking to buy property. Source: Supplied
“The last thing you want to be doing is jumping in only to find out you can’t afford it or it’s not practical,” she said.
Capital city options
At least 10 suburbs in each capital city have been identified where deposits of $50,000 or $100,000 could secure a home.
The amount for the deposit does not include extra costs buyers need to cover such as associated fees and lenders mortgage insurance (LMI).
Real estate analyst Terry Ryder from real estate analysis and research website Hotspotting worked on the report, and wrote in it that one of the reasons home ownership was “often declared beyond the reach of the average consumer is because it is sometimes based on unrealistic parameters”.
Ryder said those parameters included “basing affordability on the size of a 20 per cent deposit to buy a house in a major city”.
The national median value of a house is currently more than $800,000, so a deposit of 20 per cent would be $160,000.
Purchasing a property with a deposit of less than 20 per cent attracts LMI, a charge paid upfront as a form of insurance that lenders say protects them in case a borrower is no longer able to make the required repayments on their loan.
According to Canstar’s report, houses can be secured with a $50,000 deposit in suburbs including Brendale in Brisbane, Melton South in Melbourne, Clarendon Vale in Hobart, Elizabeth South in Adelaide, Calista in Perth and Palmerston in Darwin.
While it’s possible to get into the property market with that budget in Sydney and Canberra, such a deposit is only enough to buy a unit.
However, St Marys and Campbeltown in Sydney and Isabelle Plains, Evatt and Holt in Canberra could be options for those with a $100,000 deposit.
Type of dwellings
Ryder said by considering attached dwellings, buyers with smaller deposits could have more opportunities to enter the market.
“Almost a third of the properties featured in the Deposit Stars report reflect the growing trend of buyers opting for the likes of units or townhouses,” he said.
“With so many of these properties in central locations, and at the perfect size for both downsizers and first home buyers, there’s no doubt this trend will continue.”
Regional property with potential
The list features 10 regional suburbs each from within the Northern Territory, Victoria, NSW, Tasmania and South Australia, as well as 15 suburbs each from Western Australia and Queensland.
Rockhampton (QLD), Renmark (SA), Mildura (Vic), Mount Austin in Wagga Wagga (NSW) and Ravenswood in Launceston (Tasmania) are among the suburbs where $50,000 is a big enough deposit to get into the property market.
In the WA town of Geraldton, buyers can not only purchase a property with a deposit of $50,000 but if they buy in the suburb of West End, they could keep their monthly repayments below $700.
Paying lenders mortgage insurance
Tindall said: “For some borrowers, it’s not realistic to come to the table with a deposit of 20 per cent for their first home.”
She said while many factors had to be considered by borrowers, “in some cases … it can be worth just paying the lenders mortgage insurance, depending on how much that is, in order to get a foot in.”
“What’s important, however, is if they make the decision to have a smaller deposit, to understand what the trade-offs might be, and to make sure that they’re comfortable with those trade-offs.”
Tindall said about 32 per cent of people taking out mortgages were borrowing at least 80 per cent of the cost of their home, and that number was rising.
Avoiding LMI with a smaller deposit
Interest rates on mortgages with a higher loan-to-value ratio are generally higher than those who have paid a larger amount of the value of their home.
Western Australia and Queensland are the only states with suburbs on the list that people could buy in without having to pay LMI.
That’s because there are properties that meet all of the criteria to make the list that are under $250,000, so a $50,000 deposit would account for a more than 20 per cent deposit.
First-home buyer discounts can also reduce the amount of fees for those eligible for the subsidies.
