House prices in South Africa: the true cost of buying revealed – realestate.com.au

South Australian homebuyers are paying almost double the sticker price of their home in hidden costs over the 30-year term of their loan, as extraordinary new figures reveal the true costs for buyers taking advantage of the government’s First Home Guarantee Scheme.

New data from Finder.com.au shows that over the life of their 20 per cent deposit loan (assuming they don’t make any additional repayments) an Adelaide house with an average price of $864,250 will end up costing them as much as $1,615,913 after paying a whopping $751,663 in interest and another $433,830 in stamp duty.

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Unit buyers also end up paying almost double; their $600,000 house will cost $1,121,837 by the time they pay their $521,837 in interest.

The data assumes a 20 percent 30-year loan at an average interest rate of 5.69 percent for a first-time homebuyer of an existing home as the primary residence.

Finder home loans expert Richard Whitten said underestimating the true cost of housing will lead to some borrowers overextending themselves.

“I think transparency and education about the lifetime costs of buying a home are very important,” he said.

“If more people understand this, they might try to borrow less, get a bigger down payment or set their sights on a smaller, cheaper home – but that hasn’t happened yet.”

The data shows that median-priced homes in South Africa’s most expensive suburb – the $3.29 million Medindie – end up costing more than $6.326 million after 30 years with a 20 percent deposit, and almost $6.684 million with a 10 percent deposit.

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At the other end of the spectrum, the state’s cheapest properties – Andamooka units for $65,000 – will end up costing you $123,137 with a 20 percent down payment, and $130,204 with a 10 percent down payment.

For those considering taking advantage of the government’s First Home Guarantee Scheme with a 5 per cent deposit, Finder data shows that buyers of an Adelaide home with a median price – $864,250 – will pay $892,600 in interest over the life of their 30-year loan – more than the value of their home – pushing the total cost up to $1.75685 million and a whopping $140,937 more than if they would have bought with a loan. 20 percent deposit.

Unit buyers who purchase a $600,000 unit will end up paying $619,681 under the scheme – $97,844 more than if they bought with a 20 percent deposit – bringing the total to more than $1.2 million.

Blackfish Finance founder Leah Busby.

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Blackfish Finance founder Leah Busby said there were pros and cons to the plan.

“If people had waited to enter the market with a 20 percent down payment plus fees, their home would probably have gone up by more than $100,000 by the time they saved that, so there are definitely pros and cons to that,” she said.

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“And there was already a solution for people with a low deposit: people have been using a family guarantee for years.”

She said buyers should try to pay off their loans as quickly as possible.

“Create a habit early, even $50 a month makes a big difference, and offsetting and redrawing bills can all help shave years off your mortgage,” she said.

Shaba DC is currently building its own house and hopes to pay it off within 15 years. Image/Russell Millard Photography

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Parabroker Shaba DC, 32, is about to start building in Morphettville and said she planned to pay off her house as quickly as possible.

“I plan on using multiple offset accounts and switching my banking for my paycheck and those daily transactions to those offset accounts to pay it off faster,” she said.

“My hope is that I can pay it off in 15 years,” she said.

– with Aidan Devine