The real cost of the ‘fixer-upper’ homes first house hunters are buying – realestate.com.au

When renter Caitlin Webster moved from the Sunshine Coast to Brisbane three months ago, she had to have a tough conversation with a mortgage broker about which houses she could actually afford.

“It’s definitely a different kind of housing market,” she said. “I think I’ve been priced out of a lot of areas where I would ideally like to live.”

Mrs. Webster had been casually going to open houses for the past eighteen months to get a feel for the market. But by the time she could afford a 20 percent down payment, she said home prices had risen faster than she expected.

“I was looking for a place to rent when I moved here, to see if I liked the job and Brisbane,” she said, “but ideally I would like to pay off my mortgage, rather than someone else’s.”

Even with a 20 per cent deposit, Finder financial experts found Brisbane homeowners often pay almost twice the sales price of their home over the life of their mortgage contract.

When both interest and stamp duty are factored in, buyers who secure a property with that deposit will end up paying around 90 percent more for their home than the original contract price; with a typical $980,000 home actually costing $1.866 million over the course of a 30-year loan.

Some experts have warned that this gap could be wider for people coming in with a 5 per cent deposit under the First Home Guarantee Scheme, despite the government guaranteeing the remainder of a 20 per cent loan to avoid lenders’ mortgage insurance.

But renting is not safe either; PropTrack research has found the average Brisbane renter will pay about $200 a week more within a decade.

A home like this in Logan Central, where the median home price is $1.12 million, would mean a buyer would spend $2.225 million over 30 years if buying with a 10 percent down payment.

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“The way I see this is this is not going to be my forever home,” Ms. Webster said. “I prefer to enter the market at a price that is realistic for myself. I understand that I will eventually be priced out [completely] with the growth that is happening.”

Ms Webster said she became frustrated at the undervaluation of homes on websites such as realestate.com.au, where homes would sell for hundreds of thousands of dollars more than what an estate agent would say they were worth.

She recently said she found a unit in Nundah that she wanted to make an offer on while it was not yet on the market.

“The range the agent told us was between $750,000 and $760,000,” she said. “I looked at past prices [years ago] when it cost $400,000, but I also know that if it comes to market it could easily fetch $900,000.”

Webster said she hoped to be able to afford a home near the city, but the only homes she could find in her price range were in need of serious renovations. Photo: Liam Kidston

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But the former rental home is in need of repairs, with cracked paint, torn curtains and a broken balcony door.

“It’s a lower off-market price because it’s an older building that needs renovation; so if I put in an offer I can expect to have to put in more money to make it a place I want to afford,” Ms Webster said. “If I can put in as much money as possible, with the equity and growth, then I will do that [eventually] can buy something else.”

Buyer’s agent Lauren Jones said she saw a growing class divide between those in the property market and those who couldn’t get into the market.

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Lauren Jones of Lauren Jones Buyers Agency said that when accounting for finances it was important to include a cushion in expenses, to ensure you can afford things beyond mortgage repayments.

“Get in [the market] faster is beneficial, even if it is with a lower deposit,” she said, “simply because the market moves so quickly and it is harder to save more than the rates at which prices are rising.”

“Just because the bank says you can borrow that much money doesn’t mean you feel comfortable with it.”

Ms Jones added that she saw a growing wealth gap between people inside and outside the property market.

“It’s almost like eliminating the lower class, in many ways,” she said. “Those in the property market will become so much richer because of the price increases, while others may slip through the cracks.”