GETTING that first home might seem like an insurmountable task in modern day Australia, but according to a leading real estate investment body it was not as bad as it seems.
Skyrocketing house prices in the capital cities should not dissuade young Australians from getting into the housing market according to Property Investment Professionals of Australia chairman Peter Koulizos.
He had a closer look at annual figures for what people are paying now compared to 1990 when it came to repaying a home loan and said homes were now more affordable.
And although property was no doubt more expensive, he said that people were ignoring the impact of significantly lower interest rates.
“And you need to look at how hard it is to pay off that mortgage,”
“A million dollar home is expensive, but it can be affordable if interest rates were one per cent and you had 50 years to pay it off.”
His research showed that in 1990 an average home loan of $66,300 would require a crippling 48.1 per cent of the annual average wage to pay off due to the extremely high standard variable rate of 17 per cent.
In 2018 the average home loan size had grown substantially to $389,000, but because the standard variable rate was just 5.1 per cent, the repayments were a 40.9 per cent of the average wage.
Although low rates were not set in stone, he said it was unlikely to rise to the high levels of the ‘80s and early ‘90s.
“Back then inflation was in the double digits and now the Reserve Bank has struggled to get inflation up,” he said.
“Even when you look at the futures market, the worst case scenario is that interest rates will be 1.5 per cent higher than they are today.”
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