Moving to Melbourne implies a great deal of research on various aspects of life and one of them is property. Buying a house always requires a serious amount of thought, but the situation is perhaps even more serious in Melbourne.
Here, prices have been rising fast in recent years, property development is rapidly changing the face of many neighbourhoods, and property law is determined on a state level.
Fears of a Melbourne housing bubble...
House prices in Melbourne rose by 5% in the third quarter of 2013 alone - part of a longer trend of rising property prices that saw increases in real prices of 178% between 1996 and 2010.
These are far bigger than the increases seen in Sydney and have prompted fears that Melbourne is in the advanced stages of a property price bubble that has gripped Australia for the last two decades.
Thinking of moving to Melbourne?
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Many commentators are predicting that this bubble - fuelled, much like the US subprime crisis by cheap credit - will burst imminently.
...may be exaggerated
This seems like a legitimate fear for the country as a whole, but doesn’t necessarily mean that individuals should be put off buying a home in Melbourne!
Firstly, a large contributor to soaring prices in Melbourne is the amount of property investment by wealthy foreigners, insulating the central parts of the city, to some degree, from any wider drop in prices.
Secondly, house prices vary widely by suburb. Desirable parts of a large city like Melbourne will also weather a bursting bubble better than less fancied suburbs.
Nevertheless there is a need for careful and in-depth research around your Melbourne house buying decision.
On purchasing a house you will be liable for stamp duty charged by the Victoria State Revenue Office. For a property that will be your Principal Place of Residence (PPR), stamp duty is levied at
- $2,870 AUD plus 5% of the dutiable value in excess of $130,000 AUD for properties costing $130,000 AUD or more;
- $18,370 AUD plus 6% of the dutiable value in excess of $440,000 AUD for properties costing more than $440,000 AUD;
- $2,870 AUD plus 6% of the dutiable value in excess of $130,000 AUD for properties costing more than $550,000 AUD;
- 5.5% of the dutiable value for properties costing more than $960,000 AUD.
However, if you are buying a PPR for the first time in Australia you are probably eligible for a first home buyers’ reduction of 40% off your stamp duty (unless the property costs more than $600,000 AUD).
At the end of 2013 standard variable mortgage rates in Australia were around 4.5% - 6.4% with three year fixed rates available at around 4.7% - 5.15%. Set up fees for Australian mortgages are typically around $600 AUD.
First Home Owner Grants
As of July 2013 there is just one scheme to help first home owners onto the property ladder in Victoria (beside the stamp duty reduction): the First Home Owner Grant.
This is a payment of up to $10,000 AUD for people purchasing homes with a value of up to $750,000 AUD. In order to be eligible for the grant you must be a permanent resident at the time of application and you must not have owned residential property in Australia before. You can apply for the grant through an Approved Agent (normally your mortgage lender).
Now that you have a better idea of how the housing market in Melbourne works, take a look at the 20 things you should know before moving to Australia so that there are no surprises!