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Thinking of buying property?

You’re probably aware that Australian house prices are currently going through the roof[1].  According to one source at ANU[2], it’s not a shortage of houses which is pushing the prices up. It’s due to record low mortgage rates and Aussies having more money to spend on houses due to forced savings during Covid.

In fact, capital city house prices are surging at their fastest rate in 32 years[3] and now regional areas are catching up[4] as people realise physical distance is no barrier to working[5].

The good news for borrowers is that interest rates are at a record low of around 2% and could stay that way until 2024, according to the Reserve Bank[6]. The downside is that Australia has one of the highest levels of household debt in the world[7].

So are there still opportunities if you want to buy a property in this overheated market?

For first home buyers

Yes. If you’re looking to invest in your first property, not only could you benefit from current low interest rates you could also take advantage of the  First Home Super Saver Scheme. This allows you to save money for your first home through your superannuation which is taxed at a lower rate than the savings in your bank account.

As a first home buyer, you could also pay reduced or no transfer (or stamp) duty fees when you purchase your property with the help of the First Home Buyer Assistance Scheme.

A word of caution for borrowers

The current market may present an amazing opportunity to secure a property at drastically reduced interest rates. And many buyers may want to borrow the maximum amount they can from their bank or credit union.

But with interest rates so low (around 2%), it’s worth remembering that they can soar as well as subside. In 1989, for example, interest rates surged to an eye-watering 17%[8].

It all adds up

Apart from the house deposit, you could also have to pay transfer duty, legal fees, pest and building inspections, bank valuation fees and moving costs – many of which need to be paid upfront.

So make sure you do the numbers on getting a home loan before you make an offer on a property.

And if you haven’t got a 20% deposit saved, your lender may require you to take out lenders’ mortgage insurance (LMI) to borrow 80% of the value of your home. This protects the lender, not you, in case you default on the loan.

Take a long-term view

So how can you protect yourself against unexpected events which could affect your ability to pay the mortgage?

One way is to have insurance cover within your superannuation account which can be a tax-effective way to cover yourself for unforeseen events. Insurance cover includes Death, Terminal Illness and TPD (total and permanent disability) cover as well as Income Protection insurance. For more information, please refer to our Insurance in super factsheet or give us a call.

A final note

 If you are thinking about buying your first home, don’t get caught up in FOMO (fear of missing out) and do your research to make sure that the property you are buying is the right lifetime investment for you.

Like super, your home may be the biggest investment you will make and will also fluctuate during market cycles. So even though your house price could go up, it could also come down in value during times of economic uncertainty[9].

Need help?

If your circumstances have changed or you simply want more information, help with your super is available at no extra cost. Request a call from us here to discuss insurance in super or the first home super saver scheme contributions opportunity. Or, give our member services team a call on 1800 680 627.


[1] https://www.finder.com.au/how-australia-property-market-comeback-after-covid?utm_source=email_internal&utm_medium=newsletter&utm_campaign=2021-03-24%2B%255BAU%255D%2BGeneral&utm_content=20210024&utm_term=7d9131bfc36f4e6d9d2366e4dac2191b&futm_source=email_internal~7d9131bfc36f4e6d9d2366e4dac2191b

[2] https://www.abc.net.au/news/2021-04-14/house-prices-australia-climbing-not-for-the-reason-you-think/100065644

[3] https://www.abc.net.au/news/2021-04-01/home-prices-rise-at-fastest-pace-in-2-years-in-march-corelogic/100043190

[4] https://www.abc.net.au/news/2021-02-15/sydney-exodus-creates-housing-crisis-in-regional-nsw/13144424

[5] https://www.economist.com/special-report/2021/04/05/the-rise-of-working-from-home

[6] https://www.rba.gov.au/media-releases/2021/mr-21-03.html

[7] https://www.rba.gov.au/publications/rdp/2020/2020-05/why-is-australian-household-debt-high-relative-to-history-and-other-countries.html

[8] https://www.finder.com.au/historical-home-loan-interest-rates

[9] https://homeguides.sfgate.com/property-values-down-52344.html