First home buyers priced out of Sydney's spring property market

Monday 19 September 2016

Article by Kelly Emmerton

The Sydney property market has recorded a high clearance rate of 85.1% over the weekend, according to Domain - but property prices remain out of reach for some first home buyers.

First home buyers priced out of Sydney's spring property market

The record breaking clearance rate was a huge step up from the 71.3% rate from the same weekend last year, and it seems much of the difference could come down to a shortage of properties up for auction.

567 auctions were held on Saturday, which is significantly lower than the 832 conducted at the same time last year. Overall, auction numbers have dropped this spring season, with just 1,682 homes auctioned in Sydney so far in September - a drop of 32.3% from last year’s number.

Although clearance rates are high, the lack of properties going under the auctioneer’s hammer means that prices are still steep in most Sydney suburbs.

RELATED: Westpac cuts discounts on new home loans

Mozo’s resident property expert, Steve Jovcevski, predicted last week that despite the high dollar value of property prices, sales would remain strong thanks to the rock bottom interest rates available at the moment, starting from just 3.39%. Now, with the number of properties up for auction much lower than expected, prices are indeed as high as ever.

The median auction price in Sydney over the weekend was $1,221,000 - slightly lower than the $1.26 million recorded the previous weekend, but significantly higher than the $1.08 million median recorded on the same weekend last year.

High prices and fierce competition for the available properties mean that first home buyers are in danger of being priced out of the market.

ABS data show that first home buyer loans have dropped by 4.6% in NSW this year, and experts estimate that to enter the property market, prospective buyers will need around 5 years of savings from an average income.

The lowest auction price over the weekend came in at $360,000 for a 2 bedroom home in Kanwal. For a buyer with a 20% deposit ($72,000), borrowing the rest of the price on a home loan at 3.39% - the lowest rate in our tables, available from loans.com.au - this would mean monthly repayments of $1,425. Over a 25 year mortgage, this buyer would pay a total of $139,458 in interest.

On the other end of the scale, the most expensive property sold at auction over the weekend - an 8 bedroom home in Strathfield - went for $7.3 million. With a 20% deposit ($1,460,000) and a mortgage at 3.39%, this buyer would be looking at monthly repayments of $28,893 and a total of $2,827,906 interest over a 25 year loan.

Although these property prices may be prohibitive for some first home buyers, Steve’s previous advice for property hopefuls still rings true - “...if you can afford to buy, you’ll probably make money in the long run, because the property market isn’t showing any signs of slowing.”

So if you’re looking to break into the property market, check out some of the best home loan deals available with our side-by-side mortgage comparison.

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