Melbourne’s property market continues to push housing affordability out of reach for many buyers. With the median house price at $918,350 and units averaging $554,306, purchasing a home requires substantial financial preparation.
House prices have risen 2.2% year-on-year, further tightening the market for first-time buyers and investors. This article offers a detailed analysis of the current market, weighing the costs of buying versus renting and outlining the additional expenses that often catch buyers off guard.
By the end, you’ll have a comprehensive understanding of whether owning a home in Melbourne in 2024 is within your financial reach and the strategic steps you need to take to get there.
Melbourne’s Rising Home Values in 2024
Melbourne’s residential property market has seen steady growth, marking its third straight month of rising home values. CoreLogic reports that Melbourne’s housing market has now reached $11 trillion, though growth is slowing compared to previous years.
Despite the challenges of affordability, there are still opportunities for buyers to invest in Melbourne’s dynamic property market. Let’s dive deeper into what is driving these housing costs.
What’s Driving Melbourne’s Housing Costs?
Several key factors continue to drive Melbourne’s rising housing costs in 2024:
- Property Shortage: Limited housing supply continues to push up demand, keeping prices high.
- Government Incentives: While government schemes like the First Home Owner Grant (FHOG) are still in place, they are not enough to offset the high costs. Additionally, stamp duty adds a significant burden. For example, on a $1 million house, you could pay up to $55,000 in stamp duty fees.
- Rising Construction Costs: According to CoreLogic’s latest report, construction costs have picked up pace in the September quarter of 2024, adding further pressure on home prices, especially for new builds.
Buyers must consider these factors when planning their home purchase and look for opportunities where market conditions could work in their favor.
The Rental Market’s Impact on House Prices
In October 2024, Melbourne’s rental market remains highly competitive. Rents are driven up due to a population increase and lack of new housing supply. The median rent in Melbourne is currently $500 per week, with regional Victoria averaging $420 per week.
Rental vacancy rates are low, and competition is fierce, contributing to continued pressure on house prices. As long as rental supply remains constrained, house prices are likely to stay elevated as more people turn to homeownership.
Renting vs Buying a House in Melbourne
Costs of Buying:
- Initial Costs: Buyers must consider a cash deposit, stamp duty, and additional fees, which can account for 6% of the property’s purchase price.
- Ongoing Costs: Homeownership brings annual costs like property taxes, insurance, and maintenance, typically 1% of the property value per year.
- Equity Growth: Buying a home allows you to build equity over time, which can increase net worth and be leveraged for future investments.
Costs of Renting:
- Lower Upfront Costs: Renting requires a bond and a few weeks’ rent in advance, far lower than the deposit needed for buying.
- Flexibility: Renting offers the freedom to move with less commitment, but renters miss out on building equity.
- Avoiding Market Risk: Renters avoid the risk of falling property values and don’t bear maintenance costs, which are covered by landlords.
Financial Planning for Melbourne Homebuyers
Before buying a house in Melbourne, it’s crucial to understand the financial obligations involved, including:
- Mortgage Rates: In 2024, interest rates have continued to rise, which directly impacts the affordability of mortgage repayments.
- Down Payments: A 20% deposit remains the standard for avoiding lender’s mortgage insurance (LMI). For a $934k house, this equates to roughly $187,000 upfront.
- Additional Fees: Buyers should budget for building inspection fees, legal fees, and other closing costs, which can add up quickly.
First Home Buyer Incentives in 2024
The First Home Owner Grant (FHOG) continues to offer $10,000 for eligible buyers purchasing or building a new home valued at up to $750,000.
Additionally, duty exemptions for properties with a dutiable value below $600,000 and concessions for properties between $600,001 and $750,000 are still available in Victoria.
It’s essential for first-time buyers to explore these grants and concessions to reduce the overall cost of their home purchase.
Extra Costs of Owning a Melbourne Home in 2024
Beyond the mortgage, here are the additional costs to budget for:
| Expense Type | Description |
|---|---|
| Stamp Duty | A tax paid to the government when buying a house, varies based on the house price. |
| Deposit | For an $800,000 house, a deposit of $170,000 is needed. |
| Mortgage Repayments | Estimated at about $3,000 per month for a $680,000 mortgage. |
| Council Rates | Fees for local services like trash pickup and road upkeep, varying by location and house size. |
| Home Insurance | Covers repairs if the house gets damaged, cost varies based on the house and coverage. |
| Contents Insurance | Covers personal belongings in case of damage or theft, cost varies. |
| Utilities | Monthly bills for electricity, gas, and water, around $75 for a single person and about $136 for a family. |
| Maintenance & Repairs | Costs for general upkeep and fixing issues, such as a leaky roof, vary based on needs. |
Suggested reading: Complement your current read with our expert analysis on Melbourne’s property trends: What is happening to property prices in Melbourne?
FAQs on ‘Can I Afford a House in Melbourne?’
What salary do you need to buy a house in Melbourne?
According to a financial analysis, to comfortably afford a median-priced house in Melbourne, one needs a minimum salary of $2,820 per week, or a taxable income of $146,640 per year. This figure is more than double the city’s median salary of $67,600.
How much do you need to earn to buy a $500k house in Australia?
For purchasing a $500k house in Australia, an individual needs to earn around $100,000 per year to manage the mortgage payments comfortably.
What is the average age of first-home buyers in Australia?
The average age of first-home buyers in Australia is currently 36. This reflects the unique home buying journey of Australians and suggests that homeownership remains a viable option for younger Australians.
Is $100k a sufficient salary to live in Melbourne?
A salary of AUD 100k is considered decent for living in Melbourne, allowing for a good lifestyle, though it may limit savings potential. Typical expenses can include rent of $400–$500 per week and groceries of $150–200 per week.
At what age do most Australians buy their first home?
The average age for Australians buying their first home is between 31 and 33 years. The majority of these buyers are couples, often with children, according to statistics from the ABS.
