how do people afford million $ property?

Because they are BROKER than you. Boom tish.

 

change to IO for your own house, apply top up loan / refinance to get more loan from your equity, buy an IP with that, as long as your servicibility is ok ( check with broker), then start rolling again after several years.
my first IP was bundled with my PROP, then after several years when the equity is enough for itself, refinance to make it separated... not ideal situation at first, but now it's better.

 

I don't see many investors purchasing $1M+ properties, those who do tend to have quite high incomes. As has already been suggested the rental income from the new property helps with the affordability. At this point most properties would be quite heavily negatively geared (if you're borrowing the full purchase price), so it is out of reach for many people.

I'm also seeing quite a few owner occupiers purchasing properties for 7-figure amounts. In most cases, they're selling another property and not borrowing anywhere near $1M.

 

I've assumed this to be the case also, but leads me to wonder, if the majority of people can only afford to buy a 7 figure property by selling one, isn't this just a game of musical chairs?

 

Upgrading, downgrading, there's a bit of that, but the most common reason I see is to get into the right school zone.

 

Stella, you pay 3.5k pm of mortgage, that's about 42k a year ... at around 5pc mortgage your loan is about 800k. If you paid 20% deposit, then YOU actually own a million dollar property!? Clearly it can be done

 

Upgrader here. I found I could afford $1mill + property because the old home increased in value - it basically doubled in value. Before that though we lived in a unit, but I didn't sell the unit on buying house #1 as between my partner and I we had plenty of money for a deposit for the first house.

Then property prices really started to go somewhere in Sydney

My younger sister bought a townhouse in Castle Hill, paid that off, bought a fabulous home in Castle Hill pre boom then sold the townhouse during boom.... they did amazing with their buy so that there was only a small gap in sale and purchase price. They did extremely well and the house is now worth a lot more than what they bought it for. What they could have done better though was to not pay off townhouse 1 but instead make all payments into offset and keep it as an IP. That townhouse is a 6 minute walk to Castle Hill town centre including the new rail, and it will always do well, her townhouse has a very large and lush garden (i'm guessing her townhouse might have been on about 300sqm), lots of sunlight and its all in a very well maintained small complex.

But to be fair, a few years ago interest rates were higher so their repayments would have been higher and this interest rate drop is not something that anybody could have been able to predict with any certainly...

 

Twas always thus me thinks. Called the property ladder ? If you are buying houses at prices at or above the areas median price and you are in your 20's 30's 40s' etc you will likely have to have a higher than median income for the area in order to upgrade while holding the old property. Or a larger equity position than most of your cohort.

 

So it's actually a game of snakes and ladders

 

AFR last week stated that $116K net income could get a mortgage just over $1M. Assuming a significant cash or equity deposit would be required.

 

• Sell existing place, free up $150k+ in cash
• Buy $1m home with $850k loan & current sub 4% interest rates
• Keep $1k week / $4k month for spending & other expenses, $7,000 into loan
• Depending on rate rises be debt free in 13 years or less with a $1m+ home

You can easily service/buy a $1m home, that doesn't mean you should or you need it.. You could also look at buying an investment property with your $150k as the deposit. in 2nd tier cities like Brisbane or South Australia you can get reasonable suburban properties that are neutral or positive geared with that sort of $$. Maybe not Syd/Melb unless you're willing to go really outer or are a good bargain hunter.