A study by HSBC bank in 2019 revealed that Australians dedicate an average of 2.5 hours per week to focus on property, surpassing the time they spend at the gym (1.08 hours) or conversing with their parents (0.88 hours).
The total worth of residential dwellings in Australia increased to $9,874.7 billion in the March quarter of 2023, signifying a substantial surge in property investment despite a slight drop from the previous year’s high of $10.14 trillion.
Despite investor retreats due to interest rate hikes, recent ABS data displayed a 35.3% surge in new investor mortgage commitments in 2023. Many still consider property a safer option compared to the volatile stock market. This viewpoint solidified after the stock market crash in the early 2000s. Read more about investing in property in Australia.
Buying a House in Australia
Navigating the process of buying a house is an exciting yet intricate venture. The following steps aim to streamline and guide individuals through the house buying process.
- Save for a house deposit
Initiate the process by organizing your finances. Create a budget to determine the amount you can allocate towards your house deposit. To set a goal, research house prices, establishing a target for savings. A recommended deposit goal is 20% of the purchase price, inclusive of additional buying costs. - Work out what you can afford to borrow
Consider individual financial circumstances. The amount one can afford to borrow is contingent upon income, financial commitments, accumulated savings, credit score, and credit report. Given the rising mortgage interest rates, maintain some flexibility in your borrowing capacity. - Find the best home loan rate
The interest rate plays a pivotal role in securing an optimal home loan. Even a marginal variance in interest rates can have a significant cumulative impact over time. Compare various home loan rates by approaching multiple lenders. Consulting a mortgage broker can assist in identifying personalized loan options. - Find a house to buy
Strike a balance between lifestyle preferences and financial feasibility.- Understand the motive behind the purchase. Whether for family expansion or renovation, clarity aids in narrowing down the property search.
- List down ‘must-haves’ (essential property attributes) and ‘nice-to-haves’ (secondary preferences), prioritizing the former to streamline the search.
- Stay within the stipulated price range while exploring property options.
- Understand the motive behind the purchase. Whether for family expansion or renovation, clarity aids in narrowing down the property search.
- Negotiate to buy a house
Maintain budgetary discipline during negotiations. Whether at an auction or via private agreement, endeavor to stay within your financial framework. While bidding at an auction, expect to pay a deposit immediately (e.g., 10% of the purchase price) with no cooling-off period.
Under a private agreement, the contract of sale will specify the deposit amount and the cooling-off period for most states and territories, allowing withdrawal with written notice. - Settle on your new home
As you near the final stages of the process, additional costs need addressing before moving in. Settlement marks the property’s title transfer, initiating your mortgage. The settlement period, outlined in the contract of sale, stipulates the full purchase price payment.Stamp duty, a one-time state government property-transfer tax, typically requires payment within 30 days of settlement.Calculate stamp duty using relevant state calculators.
- Australian Capital Territory — Revenue Office: Conveyance duty calculator
- New South Wales — Revenue NSW: Calculator — for land and property transfers
- Northern Territory — Department of Treasury and Finance: Stamp duty calculators
- Queensland — Office of State Revenue: Transfer duty calculator
- South Australia — RevenueSA calculator: Stamp duty on conveyances
- Tasmania — Tasmanian Government: Property transfer duty calculator
- Victoria — State Revenue Office: Land transfer (stamp) duty calculator
- Western Australia — Office of State Revenue: Calculators
Also, make sure to acquire home and contents insurance to safeguard against damage or loss, often a condition of the home loan. Update your budget to accommodate mortgage repayments and ongoing costs such as council rates and land tax.
You learned the essential steps you can follow while navigating the house buying process, covering crucial stages from savings to property settlement. The next step for you now is to find a reliable professional to guide you through the process to ensure your property investment funds are well-utilized.
Choosing the Right Property for Investment
Investing in property demands careful consideration of location and property type. Here’s what you need to contemplate when deciding:
House vs. Apartments
The choice between a house and an apartment is contingent on the investor’s objectives. Rental yield, long-term capital gains, and the associated costs of owning the property should influence this decision. An investor’s intent, whether for capital gains or rental income, dictates the selection between a house or an apartment.
Owner-Occupied or Rental Properties
Investors targeting capital gains might choose to live in the property they’ve invested in. Alternatively, investors seeking income from rental yield opt to have the property tenanted. Research highlights a variance in profit-making sales between owner-occupied and investor resales.
Suburb Selection
The choice of suburbs for investment depends on multiple factors, such as the investor’s goals, economic trends, and lifestyle changes due to the pandemic. Traditionally, suburbs within 10km of the CBD were recommended for their good rental yield and long-term capital gains. However, working from home trends might have impacted this. Proximity to schools, transport, and various amenities can significantly impact a property’s desirability when selling.
In conclusion, buying a house in Australia is a significant endeavor with numerous factors to consider, making it a pivotal decision for investment. Choosing the right property demands a comprehensive assessment of various elements including location, market trends, potential returns, and personal financial objectives.
Navigating this process successfully often necessitates professional guidance and thorough research. Ultimately, a well-informed investment strategy tailored to individual goals and circumstances is essential to yield success in the Australian property market.
Sources:
[1] MoneySmart. (n.d.) Buying a house.
[2] Venz, S., & Leggatt, J. (Eds.). (2023). How To Buy An Investment Property In Australia.