Greetings from Scoutable and welcome to our June Wrap Up.
June saw 2,560 properties scheduled for auction across Sydney, with an average clearance rate of 69%. This is up 14% from last years June average of 55% (2,580 properties).
Melbourne saw 2,854 properties scheduled, with an average clearance rate of 68%, up 8% from last years 60% average (3,289 properties).
Brisbane saw 586 properties scheduled for auction, with an average clearance rate of 33%, down 14% from last years 47% average (461 properties).
In our last newsletter we mentioned the Coalition’s First Home Loan Deposit Scheme. From January 2020, the First Home Loan Deposit Scheme is where the government will cover the cost of lenders mortgage insurance (LMI) for first-home buyers (but for only 10,000 first home buyers). To qualify for the scheme, the first-home buyer needs to have loan approval, 5% deposit and earn under $125,000 a year as a single, or under $200,000 as a couple. The maximum purchase price of the property has yet to be released.
Eliza Owen, Research Analyst at Domain, undertook a hypothetical first-home buyer scenario which showed that whilst the scheme is a better alternative to paying LMI, it will potentially cost tens of thousands of dollars more (over the life of the loan) than starting with a 20% deposit. See table below: -
Ms Owen’s scenario is based on the following assumptions: -
- Entry level house price for combined capital cities (excluding Darwin) of $512,000
- Discounted-variable mortgage rate of 4.61 per cent
- Principal and interest, first home buyer loan
- No monthly fees
- Monthly repayments
- 25-year loan
- LMI costs of $15,000, capitalised over the full term of the loan
- Does not include stamp duty, conveyancing or other costs
Ms Owen advises ‘first-home buyers should look long and hard at the scheme before jumping at it, paying particular attention to additional servicing costs as well as factoring in potential capital gains and the cost of renting while saving’.
Under the first-home buyer deposit scheme, a first-home buyer would be paying more over the life of the loan to get into the property market now. Ms Owen suggests that an average Sydney first-home buyer could save themselves almost five years by using a 5 per cent deposit instead of a 20 per cent deposit. Conversely, whilst the smaller deposit saves time, it costs more money.
20% deposit – total cost of house and loan $793,102, monthly repayments $2,203
5% deposit with LMI – total cost of house and loan $871,103, monthly repayments $2,818
5% deposit with Government Scheme (no LMI) - total cost of house and loan $845,808, monthly repayments $2,734
The calculations show that with a 5% deposit and paying LMI, the first home buyer creates an added $78,001 owed over the loan. Where a first-home buyer under the first-home buyer deposit scheme does not pay LMI, the 5 per cent scenario creates an added $52,706 owed. “The main thing to consider is that the more you pay for a deposit, the less you will pay for a life of a loan,” Ms Owen said.“[But] if the rental market you’re in is expensive or if prices are rising really rapidly, it might actually be more beneficial to get into the market sooner with a 5 per cent deposit.” The flip side is that some first-home hopefuls save on rent by living with their parents or sharing a house, she says.
Ms Owen makes a very valid point. If property prices are falling, there is no rush to get into the market and the scheme is therefore less beneficial. However, if the property market is on the rise, the scheme would be a much welcomed boost as it helps buyers secure an asset which is increasing in value.
If you are thinking of buying or investing in Australian property, get in touch to learn about Scoutable's services and how we can assist with your property search.
Until next month,
Kellie Landrey | Principal Buyers Agent
IN THE NEWS
SLIGHT HOME VALUE RISES DURING JUNE
https://www.therealestateconversation.com.au/2019/07/01/subtle-home-value-rises-major-markets-during-june/1561939599
AIRBNB GOES LUXE IN AUS
https://www.smh.com.au/business/small-business/high-end-hosts-australia-s-luxury-property-owners-jump-on-airbnb-20190625-p520xw.html
CLEARANCE RATES DON'T TELL THE WHOLE STORY
https://thenewdaily.com.au/money/property/2019/06/24/market-recovery-auction-clearance-rates/
PROPERTY OF THE MONTH
PALMER STREET, DARLINGHURST - OFF MARKET
June’s property of the month is a beautifully renovated off market apartment located in Darlinghurst. Situated within a three storey art deco block of 14 apartments, the 76sqm apartment is located on the top floor, accommodating two bedrooms, open plan kitchen / living / dining and bathroom incorporating the laundry. There is a common roof space with views across the CBD and north to the Harbour Bridge.
The apartment is located 1.3km from the CBD, a 19 minute walk via Hyde Park or 150 metres to the CBD bus stop (15 minute bus ride into town). The property is also in walking distance to St Vincent Hospital, the National Art School, UNSW (Art & Design) and retail facilities of Darlinghurst, Potts Point, Paddington and Surry Hills.
Darlinghurst provides above average potential for capital growth, solid rental yields and low rental vacancy due to its proximity to the CBD, local infrastructure, retail facilities and leafy picturesque streets with many buildings and terraces displaying historic architecture of the 1880s – 1920s.
The price guide is $1,000,000 with a rental guide of $800 per week. The annual outgoings (excluding insurance and property management fees) are approximately $5,915. At a purchase price of $1,000,000, the apartment returns a gross yield of 4.16% and a net yield of 3.56%. The apartment has also been leased on a short term basis via Airbnb, achieving a nightly rental of $200.
If you'd like to know more about this property or any others, please get in touch.
