Can I Afford a House in Melbourne? 2024 Costs and Considerations

January 4, 2024
Can I Afford a House in Melbourne?

Key takeaways:

  • Melbourne’s median home value reached $934k in January 2024, marking a consistent rise in the housing market, challenging affordability for many.
  • High demand and low supply, influenced by factors like property location and financing, continue to drive Melbourne’s housing costs upwards.
  • The rental market in Melbourne faces similar pressures with high demand and rising rents, impacting overall housing affordability.
  • Prospective homeowners must navigate financial considerations such as stamp duty, mortgage rates, and first home buyer incentives to afford a property in Melbourne.

Updated Jan 4th 2024

Can I afford a house in Melbourne in 2024? Perhaps not. The Melbourne housing market has continued to rise, making it increasingly difficult for many individuals to afford a house.

As of January 2024, the median home value in Melbourne is $934k according to the Real Estate Institute of Victoria, reflecting a 0.4% increase from the previous month and a 2.2% annual increase​. This can make it challenging for people to hop on the property ladder.

In early 2024, Melbourne’s property market shows signs of recovery, with increasing prices and a tight rental market. Prospective buyers should thoroughly research Melbourne’s real estate trends and associated costs.

Get ready as we explore:

  • Key factors driving Melbourne’s rising housing costs
  • Comparing the financial implications of renting versus buying
  • Strategies for managing additional homeownership expenses in Melbourne

Melbourne’s Rising Home Values

Can I afford a house in Melbourne?

Melbourne’s residential property market has experienced significant growth, with a third straight monthly rise in home values. Those interested in exploring houses for sale in Melbourne can find a range of options that reflect this dynamic market.

What’s Driving Melbourne’s Housing Costs?

As of January 2024, the Melbourne property market continues to show signs of growth. CoreLogic’s data from 2023 indicates that Melbourne house prices grew by +2.2%, This growth trend is expected to continue into 2024.

In addition, the state government’s stamp duty tax can add significantly to the overall cost of buying a house in Melbourne.

“For example, if a person buys a house worth $1 million, they could be required to pay up to $55,000 in stamp duty fees.”

Discussion on the Factors Influencing These Costs

Several factors are contributing to the high cost of housing in Melbourne. Let’s take a look into the main factors influencing the high housing costs in Melbourne, along with the key considerations for buyers in each area

FactorImpactConsideration for Buyers
Property ShortageDrives up demand and prices due to limited availability.Research market trends for availability.
Low-Interest Rates & Govt IncentivesIncreases market demand by encouraging more people to enter the market.Stay informed about current government incentives.
Property LocationPrice varies based on suburb amenities like schools, public transport.Choose location based on budget and needs.
FinancingCosts affected by deposit size and loan interest rates.Compare loan options for the best deal.

In conclusion, the cost of buying a house in Melbourne is high and continues to rise, making it increasingly difficult for first-time buyers to enter the market.

Buyers must carefully consider factors such as location, financing options, and government fees to make informed decisions about their purchase.

The Rental Market’s Impact on House Prices

Can I afford a house in Melbourne?

In January 2024, Melbourne’s rental market faces high demand and low vacancies, driving up rents due to population growth and a lack of new constructions.

Median rents in Melbourne and regional Victoria have risen to $500 and $420 per week, respectively. The shortage of new dwellings and low vacancy rates will likely keep the market tight, with ongoing affordability challenges for renters.

Melbourne’s rental market is expected to stay strained in 2024, influenced by population growth and the supply-demand balance.

Renting vs Buying a House in Melbourne

Costs Associated with Buying:

  1. Initial Costs: Buying a home involves a cash deposit, stamp duty, mortgage application, maintenance fees, conveyancing fees, and estate agent fees. These costs can add up to approximately an additional 6% of the property’s purchase price​​.
  2. Ongoing Costs: Homeowners also have to bear property taxes, insurance, and maintenance costs, which can be around 1% of the property value each year​​.
  3. Equity and Appreciation: Buying a home can lead to an increase in net worth over time as the property’s value appreciates. Home equity can also be leveraged for future property purchases or other large expenses​​​​.

Costs Associated with Renting:

  1. Lower Upfront Costs: Renting typically requires only a bond and a few weeks of rent in advance, which is significantly less than the deposit needed for buying a house​​.
  2. Flexibility: Renting provides the flexibility to move more easily and live in different locations without the long-term commitment of a mortgage​​.
  3. Avoiding Market Risks: Renters avoid the risks associated with property value fluctuations and are not responsible for maintenance and repair costs, which fall to the landlord​​.

Other Considerations:

  1. Interest Rates: Rising interest rates can affect both buyers and renters. For buyers, it increases the cost of mortgage repayments, while for renters, it could lead to increased rents as landlords pass on their higher mortgage costs​​.
  2. Security and Control: Owning a home provides more security and control over the property, including the ability to renovate or make changes​​.
  3. Long-Term Financial Implications: While mortgage payments contribute to eventually owning the property, rent payments do not lead to property ownership and are often viewed as “dead money”​​.

Buying a home can be a long-term investment with potential financial benefits, but it comes with higher upfront costs and responsibilities.

Renting offers more flexibility and lower initial costs but lacks the financial benefits of property ownership.

Financial Planning for Melbourne Homebuyers

Can I afford a house in Melbourne?

When considering purchasing a house in Melbourne, it is essential to take into account various financial factors. Here are some key financial considerations for potential homeowners:

Breakdown of Mortgage Rates, Down Payments, and Other Financial Requirements

Before beginning the house-hunting process, it is crucial to understand the financial requirements involved in purchasing a property. One of the most significant financial considerations is the mortgage rate.

Potential homeowners should research and compare different loan rates to determine which one is the best fit for their budget and financial goals. It is also essential to consider the down payment required for the property. A 20% deposit is necessary to avoid additional lender’s mortgage insurance (LMI) fees.

Other financial requirements to consider include solicitor fees, building inspection fees, pest inspection fees, and settlement fees. These fees can add up, so it is important to budget accordingly and negotiate where possible to keep costs down.

Tips for Budgeting and Saving for a House

Organizing finances and establishing a buyer’s budget is the first step when preparing to buy property in Melbourne. Potential homeowners should set a savings goal and create a budget that includes all necessary expenses, such as mortgage repayments, solicitor fees, and inspection fees.

It is also essential to consider loan options and lenders to determine the best fit for your financial situation. A mortgage broker can help potential homeowners navigate the intricacies of the home loan process and find the best loan options available.

First Home Buyers Incentives in Melbourne

First home buyers in Melbourne may be eligible for various concessions and grants, which can significantly reduce the cost of purchasing a property. As of 2023, the State Revenue Office of Victoria offers first home buyer duty exemptions and concessions. Specifically, first home buyers can receive:

  • A duty exemption for properties with a dutiable value of $600,000 or less.
  • A duty concession for properties with a dutiable value between $600,001 and $750,000​​.

It’s important to note that while established homes are no longer eligible for the First Home Owner Grant (FHOG), buyers of established homes may still qualify for these duty exemptions or concessions if they meet other eligibility criteria​​.

Additionally, the First Home Owner Grant (FHOG) in Victoria offers $10,000 for eligible buyers purchasing or building a new home valued up to $750,000. This grant is focused on new homes, distinguishing it from the duty exemption or concession available for both new and established homes​​.

It is crucial for first home buyers to research and take advantage of these opportunities, as they can provide significant savings in the home buying process. Understanding and utilizing these incentives can make a substantial difference in the affordability of purchasing a first home in Melbourne.

By researching loan rates, budgeting, and taking advantage of concessions and grants, potential homeowners can navigate the process with confidence and achieve their dream of owning a property in Melbourne.

Extra Costs of Owning a Melbourne Home

Can I afford a house in Melbourne?

Besides your mortgage, owning a home in Melbourne involves various other costs. Remember to include these in your budget.

Expense TypeDescription
Stamp DutyA tax paid to the government when buying a house, varies based on the house price.
DepositFor an $800,000 house, a deposit of $170,000 is needed.
Mortgage RepaymentsEstimated at about $3,000 per month for a $680,000 mortgage.
Council RatesFees for local services like trash pickup and road upkeep, varying by location and house size.
Home InsuranceCovers repairs if the house gets damaged, cost varies based on the house and coverage.
Contents InsuranceCovers personal belongings in case of damage or theft, cost varies.
UtilitiesMonthly bills for electricity, gas, and water, around $75 for a single person and about $136 for a family.
Maintenance & RepairsCosts for general upkeep and fixing issues, such as a leaky roof, vary based on needs.

Remember, these are estimated figures and can vary based on individual circumstances and market conditions. Consulting with financial advisors or local authorities is recommended for accurate and personalised information.

When buying a house, research and negotiate well. A mortgage broker can help find the best loan. Get your loan approved before you bid or make an offer.

Include legal fees, building checks, and pest inspections in your costs.

In short, when working out if you can afford a house in Melbourne, consider all these extra costs on top of your mortgage. They add up, so plan your budget carefully and look around for the best deals.

Suggested reading: Complement your current read with our expert analysis on Melbourne’s property trends: What is happening to property prices in Melbourne?

FAQs on ‘Can I Afford a House in Melbourne?’

What salary do you need to buy a house in Melbourne?

According to a financial analysis, to comfortably afford a median-priced house in Melbourne, one needs a minimum salary of $2,820 per week, or a taxable income of $146,640 per year. This figure is more than double the city’s median salary of $67,600​​.

How much do you need to earn to buy a $500k house in Australia?

For purchasing a $500k house in Australia, an individual needs to earn around $100,000 per year to manage the mortgage payments comfortably​​.

What is the average age of first-home buyers in Australia?

The average age of first-home buyers in Australia is currently 36. This reflects the unique home buying journey of Australians and suggests that homeownership remains a viable option for younger Australians​​.

Is $100k a sufficient salary to live in Melbourne?

A salary of AUD 100k is considered decent for living in Melbourne, allowing for a good lifestyle, though it may limit savings potential. Typical expenses can include rent of $400–$500 per week and groceries of $150–200 per week​​.

At what age do most Australians buy their first home?

The average age for Australians buying their first home is between 31 and 33 years. The majority of these buyers are couples, often with children, according to statistics from the ABS​​.

Soho is your expert team in Australian real estate, offering an innovative platform for effortless property searches. With deep insights into buying, renting, and market trends, we guide you to make informed decisions, whether it's your first home or exploring new suburbs.
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