Total housing finance for the purchase of property had the highest monthly growth rate in over three years.
It increased by 4.4% in December and signifies an additional $832 million borrowed for property purchases, according to the Australian Bureau of Statistics’ (ABS) December 2019 housing finance data.
Why is this important?
An increase in housing finance precedes an increase in housing values.
According to CoreLogic, an increase in housing finance is an indicator of an improvement in housing market.
When there is an uplift in the value of new housing finance, there will likely be an increase in property prices with a lag time of 3 months.
Since most homebuyers will need some level of credit to buy a property; this data is an early indicator of upcoming changes in the housing market.
Two of the biggest factors influencing the amount being borrowed are:
- The three cash rate cuts in 2019, and the announcement of a 0.50% cash rate in March 2020. Major banks and lenders are slated to pass on the rate cut in full in their home loan products.
- Australian Prudential Regulation Authority (APRA)’s decision to lower the barriers when assessing borrowing capacity has seen an increase in the amount customers can borrow.
The strong December result for finance points to an improve in property prices over the first quarter of 2019 in the combined capital cities’ property market.
Mortgage repayments cheaper than weekly rent
However, even with the increase in housing values, CoreLogic data shows that it might be cheaper to repay a home loan, rather than paying weekly rent.
CoreLogic has found that approximately 33.9% of properties in Australia had lower home loan repayments than paying for weekly rent. Darwin was the cheapest capital, with 77.6% of mortgage repayments being cheaper than rent. Hobart comes second with 59.7%, followed by Brisbane at 48.8%.| Rank | Capital City | % where mortgage repayment is lower than weekly rent |
|---|---|---|
| 1 | Darwin | 77.6% |
| 2 | Hobart | 59.7% |
| 3 | Brisbane | 48.8% |
| 4 | Canberra | 44.9% |
| 5 | Perth | 44.3% |
| 6 | Adelaide | 40.6% |
| 7 | Melbourne | 9.6% |
| 8 | Sydney | 7.1% |
Source: CoreLogic
Best suburb to buy in each capital city
Joint research from CoreLogic and Property Investment Professionals of Australia (PIPA) found out the best suburb in each capital city that had the best annual growth rate over the last ten years. The two best performing suburbs were Sydney’s Lakemba and Oatlands-Dundas Valley where house values grew annually by 8.4% and 8.1% respectively. While strong economic conditions and migration fuelled housing demand in Sydney and Melbourne, it also increased property prices and reduced housing affordability. Therefore, homebuyers have been looking at other capital cities to buy their property.| Capital City | Suburb to buy | Median house value 2020 |
|---|---|---|
| Darwin | Rosebery – Bellamack | $517,780 |
| Palmerston | $435,544 | |
| Rapid Creek | $591,065 | |
| Hobart | Bridgewater – Gagebrook | $259,149 |
| Rokeby | $329,901 | |
| West Moonah | $453,731 | |
| Brisbane | Roberston | $1,019,930 |
| Tarragindi | $813,738 | |
| New Farm | $1,340,392 | |
| Canberra | Casey | $698,870 |
| Crace | $808,285 | |
| Forde | $818, 003 | |
| Perth | Riverton – Shelley – Rossmoyne | $750,307 |
| Willetton | $690,546 | |
| Perth City | $831,562 | |
| Adelaide | Prospect | $751,346 |
| North Adelaide | $989,911 | |
| Nailsworth – Broadview | $708,291 | |
| Melbourne | Rockbank – Mount Cottrell | $598,268 |
| Doncaster East (South) | $1,263,792 | |
| Doncaster East (North) | $1,306,834 | |
| Sydney | Lakemba | $881,144 |
| Oatlands – Dundas Valley | $1,441,496 | |
| Carlingford | $728,476 |
Source: CoreLogic and PIPA
Tips to buy property
Before moving forward with buying a property, here are some tips you need to follow.
- Find out about any upcoming infrastructure that could positively or negatively affect your property purchase over the long term.
- Speak to local sales agents and see if there are any off-market or coming onto the market properties, as you could be the first to see them.
- Remember to look at the long term trends and be confident in what you purchase.
- Talk with local sales agents in the area to find out which streets are desirable and have higher sales prices.
- Get pre-approved for a home loan so you know the ideal price range of the property you can afford.
- Besides the house deposit, there are other costs associated with buying a property like conveyancing fees, stamp duty, etc. You should know about these additional costs before making a purchase.
- Never purchase a property without conducting a pre-settlement inspection.
Whether you’re a seasoned investor or buying your first home, our mortgage brokers are here to help get the best home loan for your situation.
Call us on 1300 889 743 or fill in our no-obligation assessment form.