What can you buy for under $400,000 in Australia?
Sydney, Melbourne, Brisbane, Perth, Adelaide: is it really possible to get into the property market with a budget of only $400,000?
Whether affordability is your top priority or you’re just looking to snap up a ‘bargain,’ we look at which city can deliver more bang for your buck, and explain the typical costs associated with buying a property at this price point.
Affordability
Each capital city has varying levels of housing affordability. A budget of $400,000 isn’t going to go as far in Sydney as, for example, Perth or Adelaide property. You will likely have to compromise with a smaller property, likely an apartment, that is relatively far from the CBD.
Number of suburbs with an average housing price of under $400,000
According to CoreLogic data, Adelaide is the city where you’ll find the most suburbs with apartments or houses with a median price of $400,000. Brisbane comes next, followed by Perth. Melbourne has only two suburbs: Powelltown and Melton. Sydney has only one suburb with a median house price of $400,000: Mellong in the Hawkesbury, about 110km away from the Sydney CBD – which by all practical purposes can hardly be considered as part of Sydney!
The affordable middle
What the CoreLogic data doesn’t account for is the increasingly popular ‘middle option’: townhouses.
The latest Census data revealed that more Australians are choosing townhouse living; with townhouses accounting for 12.7% of resident homes in Australia, up from 9.9% in 2011.
Typically, townhouses provide a more affordable alternative to a detached house, with more indoor and outdoor space and privacy than an apartment, but without the cost and upkeep of a larger home on a big block. They also tend to be positioned in closer proximity to transport hubs, retail and other amenities compared with new house & land developments.
As an example, in Brisbane, investors can currently purchase a a brand-new 4-bedroom, 2.5-bathroom, 2-car space townhouse that is less than 20km from the Brisbane CBD for only $407,000.
What does holding a $400,000 property look like?
Once you have identified your property, it’s important to understand and factor in your property purchasing and holding costs.
For example, the ‘buy-in’ cost for the $407,000 new townhouse in Brisbane would be approximately $61,000. This includes your 10% deposit ($40,700), stamp duty ($12,670), solicitor fees ($1,500) and Lenders Mortgage Insurance (LMI) ($6,500).
This townhouse could achieve $415 per week in rent (an estimated 5.3% rental yield). For someone earning the median Australian household taxable income of $75,000 per year, this investment property would cost you about $31 per week, factoring in the assumptions below.
After tax benefits such as negative gearing and tax depreciation, the property would return a positive cashflow of $44 per week.
| Interest only loan rate | 4.5% |
| Council and water rates (estimates using Brisbane City Council data) | $2,800 |
| Insurance | $1,000 |
| Vacancy rate (SQM Research data March 2019) | 2% |
| Property management costs | 7.5% |
| Accounting | $200 |
“We know that it is possible to buy a quality property at the $400,000 mark, as we have a number of properties at this price point that we are currently recommending to our customers in each of the five major cities. But it’s important to make sure that property represents genuine value, is in the right location and has all the right ingredients for long term growth.”