Where to find a house in Melbourne on a budget of $950,000

Melbourne first home buyers could soon be able to purchase more expensive properties with a small deposit, but will need to look beyond the inner suburbs, or choose a unit instead of a house.

First home buyers can pay a 5 per cent deposit and avoid lenders mortgage insurance under the existing First Home Guarantee Scheme, first introduced by the Morrison Coalition government. A federal Labor policy announced last weekend would lift the scheme’s property price cap from $800,000 to $950,000 in Melbourne.

First home buyers are being offered assistance in the election campaign.Credit: Joe Armao

Melbourne’s median house price rose to $1,035,887 in the March quarter, the latest Domain House Price Report, released on Thursday, showed.

A price cap of $950,000 would expand the range of suburbs within reach in greater Melbourne.

The most expensive suburbs within view would be Altona North in the west, Emerald in the outer east and Taylors Lakes in the north-west, each of which has a median house price of $950,000.

Buyers could consider Chelsea, Bonbeach or Keysborough in the south, Croydon, Croydon South, Ferntree Gully, Lilydale or Belgrave in the east, Watsonia in the north-east, Hadfield or Reservoir in the north or Airport West in the north-west.

But of the analysed suburbs where buyers could purchase the typical house, three-quarters were at least 15 kilometres from Melbourne’s CBD.

Some of the closest suburbs for house buyers include Footscray ($910,000), West Footscray ($857,500) or Pascoe Vale ($790,000).

The expanded program is among a range of housing policies proposed in the election campaign. Labor policy includes a shared equity scheme and a plan to build more homes exclusively for first home buyers.

The Coalition would let first home buyers claim mortgage interest as a tax deduction for new builds and withdraw money from superannuation for a deposit.

“What we’ve got are both sides of politics throwing around demand-side policies,” Domain chief of research and economics Dr Nicola Powell said.

“[First Home Guarantee] is likely to support prices in certain locations.”

She welcomed the increase to the price caps, saying they are now more in line with the realistic price of housing.

About half Melbourne’s analysed suburbs have a median house price below $950,000, she said, and almost all have a median unit price below that level.

She noted only higher income first home buyers will be able to take full advantage of the scheme, which requires a 95 per cent home loan.

She said first home buyers likely need to compromise on space or location.

“A first home in today’s pricing environment is much more likely to be a unit,” she said.

“If people have their heart set on a house it does mean they need to be out in the suburbs.”

Carlton renter Ben Ryan, 25, tried looking to buy an apartment or townhouse last year.

Ben Ryan looked at buying a home, but the prices were too high. Credit: Justin McManus

He was interested in the Victorian state government’s shared equity scheme, because he thought a 95 per cent mortgage would mean paying high interest costs. Ryan is a former Labor Party member but no longer a member of any political party.

He found many of the potential homes would have required renovations – at a substantial extra cost.

“The prices are just getting to an untenable level,” he said.

Ryan studied economics and finance at the University of Melbourne, with honours in economics, then worked as a consultant, and now works in strategy for an energy company.

“I’m sitting here looking at these prices and looking at the quality of the apartments and units that are available and I’m going, ‘These are ridiculously expensive, if I do this it’s going to be a financial burden on myself,’” he said.

“And then I look at my income and I’m like, ‘I’m in a pretty bloody good spot, how the hell is anyone else able to do this?’”

Wendy Stone, professor of housing and social policy at Swinburne University of Technology, thought the home ownership policies should be broadened to include non-first home buyers, such as people who have divorced.

She called for a broader conversation about tax reform than the minor changes to deposits or taxation proposed by the major parties over the past week.

“They’re likely to benefit people who are quite close to purchasing – what we do need more of is greater consideration of other assisted home ownership support pathways,” she said.

Mortgage broker and Red Maple Finance director Nariman Amalsadiwala has placed several clients through the First Home Guarantee.

He prefers it to the other schemes available now because it is straightforward.

Many clients have budgets of about $700,000 to $750,000.

But he thought the problem for them in paying $950,000 is they would need to save almost an extra $50,000 in stamp duty.

“The stamp duty is a killer,” he said. “It’s like giving them with one hand, and taking with another hand.”