Melbourne one of Australia's easiest capital cities to purchase property in as a first-time home buyer

When Markos Danoudis relocated from Melbourne to Brisbane for work nine years ago, he was confident the move would give him a better chance at entering the property market.

At the time, Brisbane’s property prices were far cheaper than Melbourne’s, and a few years ago, the 34-year-old began saving, hoping to get into the market faster and at a more affordable price.

But as he put away savings towards his goal deposit, property prices in the Queensland capital exploded. He was dismayed.

At the same time, prices were getting cheaper in Melbourne.

“It’s a big shock,” he says.

“I’d always thought the easy way out would be just buying up here instead of down in Melbourne … it’s only been the past couple of years that [the situation has] turned around.”

Prices were rising so rapidly in Brisbane that Danoudis started looking at Melbourne as well. He seriously considered buying there and “rentvesting“, because the prices were so much lower.

Melbourne has become one of Australia’s easiest capital cities to break into as a first-time home buyer, with new data revealing that first-time buyers in Brisbane, Sydney, Perth and Adelaide are enduring some of the toughest entry-level price rises on record.

It is now quicker to save for a property in Melbourne than it was five years ago, Domain’s First-Home Buyer Report, released on Thursday, found, showing that the cost of an entry-level house [based on the 25th percentile] has risen by just $70,000.

In Brisbane, however, the cost of an entry-level house has risen by a staggering $300,000 during that same period of time, from $435,000 to $735,000, while an entry-level house in Adelaide has risen from $377,500 to $689,000.

An entry-level home in Sydney now costs $990,000. Five years ago, it was $683,000.

“Over the past five years, the time to save a deposit has increased in nearly every capital city except for houses and units in Melbourne and Darwin, and units in Sydney, Canberra and Hobart,” says Domain chief of research and economics Dr Nicola Powell.

“When you look at the outlook for first-home buyers, Melbourne has been leading the way. When a property market is sluggish and weak, it means it gives first-time buyers a fighting chance to edge into it.”

Melbourne is the only capital city to record a significant reduction in the time it takes to save for both an entry-priced house or unit deposit over the past five years, she says.

“In stark contrast, Adelaide, Brisbane and Perth have seen the largest increases in the time to save a deposit on an entry-priced house,” says Powell.

Expressions of interest close 17 March at 5pm

93 Alexandra Avenue, South Yarra VIC 3141

5

3

2

View property

“These cities witnessed the steepest growth in entry house prices, with Adelaide surging an astounding 82.5 per cent, Perth by 74.3 per cent, and Brisbane by 69 per cent.

“If you are a first-home buyer and you’re living in Adelaide or Brisbane, you’re seeing such a change in that affordability landscape, both in the time it takes to save [and the price], because that 20 per cent deposit goal just continues to be pushed further and further afield.”

Although Danoudis considered buying back in his hometown of Melbourne, he ended up purchasing in Brisbane because he wanted to live in the property he owned.

He ended up getting in with his parents’ help due to fear of being priced out in the future.

Danoudis knew buying a house was “pretty much unachievable,” so he searched for townhouses near the city centre with a $750,000 budget, but when he discovered they were selling far too quickly and for more than he could afford, he compromised and purchased a two-bedroom apartment near the city in Windsor.

“It took me 11 months [to find and buy a property]. I looked hard by myself for about eight months, and then I got a little bit fed up with it because it was so hard. And I ended up getting a buyer’s agent.”

It will take a while for people in Brisbane to wrap their heads around the fact that it now takes longer to save for a property in Brisbane than in Melbourne, says PRD real estate chief economist Dr Diaswati Mardiasmo.

“In terms of prices and growth and things like that, for a first-home buyer, [Melbourne] definitely offers more bang for your buck,” she says.

“If we look at it in comparison to prices in Brisbane and Adelaide, it definitely is the more– I can’t believe I’m saying this – Melbourne is the more affordable capital city.”

But not every buyer can purchase solely based on where the cheapest property is, Mardiasmo says.

“There are also other things to consider: cost of council rates, insurance, moving costs, family/friends, employment, the general cost of living.”

Moving to Melbourne just because it was cheaper was not an option for someone like Sydney-based mother and business owner Jacquilyne Knight, who wanted to buy near her family.

$1.6m+

25A Thorn Street, Red Hill QLD 4059

3

1

2

View property

After saving for two-and-a-half years, Knight and her husband Tim finally purchased a house with the help of a family member who signed on as a guarantor on the loan. 

“We’ve been saving for a good couple of years to save a deposit, but we knew that we weren’t going to get all of the deposit.”

“It would have just taken us a lot longer [without family help]. It probably would have taken us another three years, probably more,” says the 38-year-old.

With house prices in Sydney rising year-on-year, Knight didn’t want to wait any longer and bought a $1.385 million house in Bangor with just a 10 per cent deposit.

Knight and her family initially wanted to live in Jannali, but the four-bedroom houses in the suburb kept going up by $20,000 to $25,000 each month, she says.  

“It’s a ludicrous amount of money. No one’s gonna be able to save that amount of money extra per month; that’s almost impossible to save.”

For any first-home buyers entering the market, Knight suggests getting help through mortgage brokers and buyers agents.

Mortgage broker Tristan Vercoe of Fortifi Finance says buyers outside of Melbourne should also be aware of other costs involved with buying in Victoria.

Contact Agent

13 Mills Terrace, North Adelaide SA 5006

4

3

3

View property

“In Melbourne, government charges come to a total of $18,248.43 for a $670,000 [house] purchase, and in Brisbane, for a $735,000 [house] purchase, the total government charges come to $9,683,” he says.

“You’re paying literally double the stamp duty. So, it’s more expensive to get into a cheaper house down [in Melbourne than Brisbane].”

Rather than trying to buy in the cheapest capital city, Vercoe says having a savings plan and understanding the government help available will get you into the market quicker. 

“I’m not saying it’s easy to get into the market. It’s so hard to get into the market right now, but it’s doable,” he says.

While price growth has slowed in many cities, Powell believes prices in more affordable locations are still under pressure.

“There has been a widening gap between where home prices are and the ability of people to pay for that home, which has been improved because of the rate cut slightly, but it still remains. I expect that we will probably see entry prices hold up better relative to mid- and upper-end price points.”