Hopeful home buyers would need to find hundreds of extra dollars a month to pay a mortgage on a property with one extra bedroom.
The price of extra space has become prohibitive for some buyers amid the cost-of-living crisis, forcing them to move further out to accommodate a growing family.
An extra bedroom costs hundreds of dollars a month in extra loan repayments.Credit: Nikki Short
In Sydney, a family hoping to buy the median-priced four-bedroom house would face $1760 extra a month in mortgage repayments than if they bought the median-priced three-bedroom house, modelling from comparison platform Canstar shows.
In Melbourne, a family that bought the typical four-bedroom house would pay $658 extra a month on their mortgage compared with the cost of the typical three-bedroom house.
A Brisbane buyer would pay $527 extra a month to have a four-bedroom house instead of a three-bedroom home, while in Perth the extra cost would be $833 a month.
The figures assume the buyer has a 20 per cent deposit, takes out a 30-year loan and keeps expenses modest.
Canstar money expert Effie Zahos said that during the lockdown years, home buyers were willing to move from an apartment, for example, to a house to have more space, but circumstances had changed and the days of cheap money were over.
“Each bedroom that you do add on is adding on to your interest bill,” she said. “It is a luxury to be able to have a four-bedroom house.
“Families will be looking at bridesmaid suburbs – so not as close to the city, maybe not having a designated area for a study but [converting] a nook under the staircase.”
She said the economic data was heading in the right direction for the next change to interest rates to be a cut, especially considering the lacklustre economic growth figures published earlier this month, but it was unlikely to happen for a while yet.
The Reserve Bank kept the cash rate on hold on Tuesday and said it would not rule anything in or out in terms of its future decisions.
Ray White chief economist Nerida Conisbee said the extra costs for more space came as property prices overall increased last year and mortgage rates also rose.
A shortage of supply of homes is not being resolved quickly, construction costs are high and prices are likely to rise further this year, especially if interest rates fall over the coming months.
Some home buyers would compromise by choosing a smaller property, while others would move further away to find the size of home they required at a price they could afford, Conisbee said.
“They do compromise a lot more on location, because location makes such a huge impact on pricing,” she said.
“Because Australian property is getting so much more expensive now, there is the shift to apartment living and people are seeing apartment living as a viable option.”
Buyer’s agent Michelle May of the eponymous agency said it had become almost impossible for many buyers to upgrade from an apartment to a family house because they faced a large price gap.
“There is a willingness to move out further, because you can’t have two or three children in a 65-square-metre apartment,” she said. “A lot of them are losing the hope of ever moving out of strata.
“People are getting stressed, so then you’ve got to consider, is it worth staying here if you’re living all on top of each other and you’re paying $1 million for a two-bedroom apartment?”
She recommended buyers face the facts early in terms of how much properties in their desired area cost, by looking online at sold prices rather than price guides.
“[Buyers could ask] ‘My budget is $1 million, where can I actually buy? What is it that I need? If it is a three-bedroom property, where does that actually exist?’” she said.
Chamberlain Property Advocates buyer’s advocate Wendy Chamberlain said although some buyers were compromising on their expectations, others were stretching themselves to afford a family home they could stay in longer and avoid outgrowing in a few years.
“The cost of buying a property with stamp duty is not cheap, so if their circumstances allow, it may be worth it,” she said.
“They may go to an area that’s a little further than where they wanted to be to get what they want.”
If interest rates fall later this year, or are tipped to fall, she expects it will make buyers more confident to push ahead with their plans and to extend themselves.
“Where there’s even the possibility of interest rates dropping, that fuels a market and people will come back into the market and even stretch,” she said.
“When they can afford more money, they spend more money.”