WITH THE MEDIAN PRICE of a home in Perth now approaching $500,000, housing affordability in Perth will become a major issue during 2010, especially with interest rates expected to rise even further.
During the coming year, home buyers will have to work even harder to find an affordable home after a period of very low interest rates and falling house prices.
One of the most common mistakes people historically make when buying real estate is that they tend to purchase within a 15 kilometre radius of where they live.
Buying a home to live in or invest should be a long term plan and this means that you should be prepared to compromise on the location in the short term to achieve your longer term plans.
There are more than 200 suburbs in the Perth metropolitan area and home buyer should consider buying into lower priced high growth suburbs which may not necessarily be in their local area.
Quickly building equity in your property should be the key consideration in buying an affordable property. This strategy will assist you in climbing up the property ladder and eventually allowing you to settle in your ‘dream home.’
Home buyers choosing lower priced suburbs should therefore purchase homes that are located close to lifestyle attractions or that will benefit from major new infrastructure developments such as shops or transport.
For example, if you live in the northern suburb of Mindarie, where the median house price is around $600,000 you might consider buying a property in southern coastal suburb of Safety Bay. The median house price in this area is still around $370,000 and has enjoyed an annual average median price growth of 11.6% over the last ten years. Safety Bay is one of the prime coastal suburbs in Rockingham and is benefiting from improved infrastructure in the area such as the nearby Perth to Mandurah railway line.
Finding an affordable property also means being prepared to compromise on the style of home you would like to purchase.
Most first home buyers want to live in a home similar to their parents. This type of home may simply be inappropriate in terms of their personal finances.
In contrast, first home buyers and even investors could consider buying an older style one bedroom apartment or villa in near city areas which are still very affordable and offer the opportunity for strong capital growth.
It may surprise many people that even in near city areas such as Wembley, the median price of a home unit is less than $300,000. There are a large number of older style home units in this area of Perth where values can be significantly boosted through cosmetic renovations.
Generally, if you buy an older home or unit in a good location where more than 70% of the total value of the property is land content then you will achieve strong capital growth over the long term.
With several thousand properties listed for sale in Perth, home buyers still have a large section of affordable properties to choose from ranging from high capital growth outer metropolitan coastal suburbs to near city properties such as older style units and villas.
Home ownership and building an investment portfolio is still a reality in the current housing market if home buyers are prepared to be flexible in their choice of location and style of property and take a longer term approach to the property market.