Your investment journey deserves some research, and even more when you are planning to finance a property. Home and commercial loans differ based on risks, terms, and conditions. See how both of these differ in the Melbourne property market.
Purpose and Use
Home loans are offered to those who want to purchase a residential property. Melbourne has seen a rise in property prices year-over-year. So, with home loans, buyers can enter the real estate market with a smaller down payment. According to the Australian Bureau of Statistics, $5.2 billion in home loans are issued to owner-occupiers (including first home buyers loans in Melbourne)
Commercial loans are offered to business owners or investors who want to invest in offices or retail spaces to generate income. Obtaining these loans is very complicated and involves a higher risk.
Risk and Return
Home loans in Melbourne involve lower risk because of the stability of the residential properties market. The average rental yield for houses in Melbourne is approximately 7.32% to 7.8% in different suburbs.
On the other hand, commercial loans offer higher returns on rentals ranging from 5% to 12%. But, it also comes with a greater risk as businesses are more likely to suffer economic hiccups.
Loan Assessment Criteria
The home loan process in Melbourne is simple, quick, and easy. Lenders just evaluate a borrower’s creditworthiness based on income, employment stability, and credit history.
On the contrary, the commercial property loan process is more detailed and hectic. Lenders evaluate the borrower’s credit history and potential income the property will generate. Borrowers must show a solid business plan and projected cash flow for approval.
Interest Rates and Loan Terms
Home investment loans in Melbourne are planned for longer terms of about 15-30 years with lower interest rates, averaging around 5.5%. This allows for smaller, manageable monthly payments.
Commercial property loans usually have shorter terms ranging from 5 – 20 years at higher interest rates, ranging from 6-8%. Borrowers might also find it challenging at the end of the term due to balloon payments.
Make the Right Choice!
Once all the differences are crystal clear, you can apply for a loan that best suits your needs. It’s always a good idea to consult finance experts, who can help you make the right decision based on your financial goals!
Property prices are expected to keep climbing higher through to mid-2025 – though not everywhere, according to a new report. We reveal where prices are tipped to go up, and where prices are expected to fall.
What a crazy financial year it’s been for property prices.
Despite a cost of living crunch and high interest rates, home values Australia-wide have soared 8.3% over the past 12 months, according to CoreLogic.
Will prices keep heading north? Or can we expect the market to cool at some stage?
These are key questions for home buyers who may be weighing up whether now is the right time to buy.
To get some answers, we turned to Domain’s latest forecast report, which sets out expected property price movements over the next 12 months.
The big picture: prices set to keep rising
According to Domain, several factors are set to push Australian home prices higher over the next year.
On one hand, we’re seeing a tight supply of new homes being built, combined with lower than usual numbers of homes listed for sale.
On the other side of the ledger, strong buyer demand is being fuelled by a growth in migration.
As Domain puts it, the “push-pull between affordability and availability” will be the factor that shapes Australia’s property market between now and June 2025.
Price growth is expected to differ between cities
That’s not to say home prices across Australia will move in the same direction and at the same pace.
Let’s take a quick tour around the nation to see what Domain believes lies in store for home buyers (and apologies to Hobart and Darwin residents – neither city was covered in the released report).
Brisbane
Brisbane’s property market has notched up an impressive 16.3% price growth over the past year. And Domain says there’s more growth to come.
With a forecast for 6-8% price growth, Brisbane’s median house price could hit a record high of up to $998,500 by mid-2025. Apartment values are expected to increase by 4-6%.
Sydney
If Domain’s prediction of 6-8% price growth proves accurate, Sydney’s median house price will hit a new record high of up to $1.76 million by this time next year.
Apartment prices (median) are also expected to reach a new record of up to $855,000 based on forecast price growth of 4-6%.
Melbourne
Melbourne’s housing market is expected to remain a little cooler, with growth between 0-2% expected – leaving median house prices between $1.03 million and $1.05 million. Unit prices are expected to do better, potentially rising by up to 4%.
Regional Victoria is the only market where Domain expects house prices to cool, with falls of 0-3% expected by mid-2025.
Adelaide
Adelaide could be on track to become a million-dollar city if Domain’s forecast of 7-8% price growth pans out. It could see Adelaide’s median house price hit a record high of up to $984,000 by June 2025.
Unit prices are anticipated to grow by up to 6%, helping the city’s median apartment price push through the $500,000 barrier.
Perth
There’s no denying Perth has had a bumper year, with a 22% jump in home prices over the past 12 months. And according to Domain there’s plenty of gas left in the tank.
With price growth of 8-10% possible over the year ahead, Perth could notch up a record-high median house price of between $840,000 and $856,000 by this time next year. In the unit market, prices are expected to jump 4-5%.
Canberra
Canberrans can expect mild house price growth, with values forecast to climb by up to 4%.
Unit prices in the nation’s capital are expected to increase by 1-4%.
