The purchase of a home is often the most significant financial transaction in a person’s life. In this article, we will consider how much to offer on the house in Australia, including what factors affect the amount you should offer and how to assess whether a house is fairly priced for its location.
It goes without saying that several financial institutions have lending programs that may enable you to borrow up to 100% of the purchased price or property value. With these programs, assuming other criteria are met, such as sufficient income and equity repayment capacity (sufficient deposit), applicants can buy more than one property by borrowing additional money against their existing property(s). The maximum loan-to-valuation ratio (LVR) an applicant can achieve through these lending programs is generally up to 90% of the value of the purchased property.
The advantages of having such a high LVR include:
However, the disadvantage is that if an applicant made a loss on their original property and cannot repay their loan in full in addition to meeting ongoing living expenses and liabilities (such as credit cards), they may quickly be forced to sell or foreclose on one or all properties. For this reason, it is important that purchasers like you take great care when considering how much to offer on the house in Australia.
House prices can vary greatly within Australia’s capital cities depending upon factors including location, size, age, and condition. These different areas are often known as suburbs or regions, but whatever name they go by, the price differential can be significant.
Although you may like a particular home and want to make an offer on it immediately, if the asking price is significantly higher than similar and recently sold properties in the area, then there could be something wrong with this property that will result in you making a very poor investment. For this reason, it is important that you carry out thorough research into house prices before placing any offer, whether it’s how much to offer on the house in Australia or elsewhere. A good real estate agent should also be able to provide sales comps (comparables) that explain what other houses in the area have sold for so you can judge whether or not it’s fairly priced.
How much to offer on a house in Australia?
To assess whether a house is fairly priced, use the following simple formula:
asking price minus land value divided by sqm x 1000 = estimated value of the house
or asking price less depreciation and repairs divided by the number of bedrooms x 10 000 = estimated value of the house
For example, if a home’s asking price is $500 000 and the size of the block (land) is approximately 800 sqm (which can be obtained from the council or other records), then:
$500 000 – $400 000 / 800 x 1000 = $625/sqm
$500 000 – $350 000 / 5 = $875/bedroom. This indicates that even though this property has five bedrooms, it would only be worth approximately $875/bedroom because of its depreciation and other features. This property may be significantly overpriced for the area.
The following list provides an indication of what price different range types of homes are selling for in various Australian regions (although note that prices vary widely depending on age, size, condition, and location).
House type – Victorian period (1870-1900)
Terraced house – $150 000 to $450 000;
Semi-detached house – $150 000 to $500 000;
Detached house – $200 000 to $700 000;
Heritage listed home – up to $2 million.
House type – Interwar period (1920s-1940s)
Terraced house – $150 000 to $450 000;
Semi-detached house – $200 000 to $550 000;
Detached house – $300 000 to $700 000;
Art deco home (interwar/streamline moderne) – up to $800 000.
House type – Post WW2 era (1950s-1960s)
Semi-detached house – :$100,000 to $$250,000 ;
Terrace home : $100,000 to $$350,000 ;
Detached house : $200,000 to $$550,000 .
House type – 1970s/1980s
Semi-detached house – :$250,000 to $450 000;
Terraced house – :$150,000 to $350 000;
Detached home – :$300,000 to $500 000.
House type – 1990s
Terrace home – :$200,000 to $350 000;
Semi-detached house – :$230,000 to $380 000.
House type – 2000s onwards |modern homes|
Apartment / unit / apartment/flat/studio flat/studio apartment etc. : $275,000 to $650 000;
Semi-detached house – :$300,000 to $750 000;
Detached home – :$500,000 and up.
Note that the price range given is only a guide and, for general, indicative purposes. The prices of older homes (Victorian period through to post WW2) in good condition will generally be higher than the figures listed here, while modern homes (the 1990s onwards) in poor condition or needing renovation will sell lower than the estimates in this article. For instance, in 2011 in Sydney, an attractive three-bedroom art deco home in Woollahra (designed by Walter Burley Griffin, who also designed Canberra) sold for well below $1 million.