Real estate listings jump in Sydney, fall in Melbourne

New property data suggests the Sydney market might be cooling but that the Melbourne market shows no sign of slowing.

SQM Research has found that more Sydney properties have been coming onto the market, which is something that generally puts downward pressure on prices.

Sydney had 26,197 property listings in May, according to SQM, which was up 5.9 per cent on the previous month and 2.0 per cent on the previous year.

Melbourne had 30,070 listings during May – a drop of 1.2 per cent on the month and 19.5 per cent on the year.

“The Sydney rise of 5.9 per cent is a little on the weaker side and I also note the monthly decline in asking prices of 1 per cent for that city,” SQM managing director Louis Christopher said.

“While it is still too early to call a slowdown in Sydney at this stage, we are watching this market closely as there has been increasing evidence of a possible slowdown.

“Meanwhile, the listings activity and asking prices out of Melbourne suggest there were very robust market conditions throughout May. To record a 1.2 per cent decline in listings plus a near 6 per cent surge in asking prices for houses is about as strong as it gets.”

City May listings Monthly change Annual change
Sydney 26,197 5.9% 2.0%
Melbourne 30,070 -1.2% -19.5%
Brisbane 28,985 3.2% -1.0%
Perth 25,540 0.6% -0.4%
Adelaide 15,777 1.3% -6.8%
Hobart 2,925 -5.7% -18.9%
Canberra 3,489 0.5% 2.7%
Darwin 2,071 3.0% -2.8%
Australia 324,041 0.5% -7.5%

Listings rise modestly across Australia

Melbourne and Hobart were the only capital cities not to report a monthly increase in listings during May.

“Normally, May listings increase over April due to the multiple holiday periods in that month. So a 0.5 per cent list for May is actually quite modest,” Mr Christopher said.

“The listings data suggests the national market was still relatively strong over the course of May.”

What’s happening in Melbourne?

SQM Research’s finding of strong activity in Melbourne contradicts recent data from CoreLogic, which reported that Melbourne’s median price fell 1.7 per cent during May.

CoreLogic also reported that Sydney’s median price fell 1.3 per cent over the month and was flat over the quarter.

In annual terms, Melbourne prices rose 11.5 per cent while Sydney prices rose 11.1 per cent.

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What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

How much debt is too much?

A home loan is considered to be too large when the monthly repayments exceed 30 per cent of your pre-tax income. Anything over this threshold is officially known as ‘mortgage stress’ – and for good reason – it can seriously affect your lifestyle and your actual stress levels.

The best way to avoid mortgage stress is by factoring in a sizeable buffer of at least 2 – 3 per cent. If this then tips you over into the mortgage stress category, then it’s likely you’re taking on too much debt.

If you’re wondering if this kind of buffer is really necessary, consider this: historically, the average interest rate is around 7 per cent, so the chances of your 30 year loan spending half of its time above this rate is entirely plausible – and that’s before you’ve even factored in any of life’s emergencies such as the loss of one income or the arrival of a new family member.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

What is a guarantor?

A guarantor is someone who provides a legally binding promise that they will pay off a mortgage if the principal borrower fails to do so.

Often, guarantors are parents in a solid financial position, while the principal borrower is a child in a weaker financial position who is struggling to enter the property market.

Lenders usually regard borrowers as less risky when they have a guarantor – and therefore may charge lower interest rates or even approve mortgages they would have otherwise rejected.

However, if the borrower falls behind on their repayments, the lender might chase the guarantor for payment. In some circumstances, the lender might even seize and sell the guarantor’s property to recoup their money.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.

What happens when you default on your mortgage?

A mortgage default occurs when you are 90 days or more behind on your mortgage repayments. Late repayments will often incur a late fee on top of the amount owed which will continue to gather interest along with the remaining principal amount.

If you do default on a mortgage repayment you should try and catch up in next month’s payment. If this isn’t possible, and missing payments is going to become a regular issue, you need to contact your lender as soon as possible to organise an alternative payment schedule and discuss further options.

You may also want to talk to a financial counsellor. 

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