The trick to finding the most affordable properties in any suburb

House hunters could potentially save hundreds of thousands in total repayments over the course of their mortgage if they look to the lower end of their desired market, a RateCity analysis shows.

While buyers often rely on a suburb’s median house price, which is a market’s middle price point, to gauge whether they can afford to buy in that market, this is not necessarily the best indicator for every buyer, according to CoreLogic.

Given that half of the market’s properties have sold for a lower price than the median value, chances are that a substantial number of properties could be more affordable than the median price – and buyers could be overlooking a market because of a higher middle price point.

What is a quartile price point and how is it useful?

An alternative option could be to look at a market’s lower quartile, or the 25th percentile. This essentially means 25 per cent of properties in that market sold for a more affordable price than that value, putting it in the lower end of the market.

Likewise, 75 per cent of properties in a market sold for a lower price than a market’s upper quartile, or the 75th percentile.

“With this in mind, some areas that might seem out of budget based on the median value may actually offer up some opportunities if buyers are willing to target properties at the lower end of the value range,” CoreLogic head of research Tim Lawless said.

He added that buyers on a budget seeking to buy into a more expensive area can do this by targeting the lower end of the market.

“This might mean looking for the worst house in the best street, buying a home on a smaller block of land, or choosing a property that needs some work.”

How much could I save if I bought in the lower end of an expensive market?

For instance, CoreLogic figures indicate the difference between the greater Sydney house market’s lower quartile and the median value is almost $300,000. This may be a sign of how different house prices can be in the lower and mid ranges of the market.

But when you throw interest into the equation, the difference between taking out a loan on a property with a lower quartile and a median price is more than $400,000, according to RateCity data.

The analysis assumes the current interest rate will not change for the period of the loan, as it is not known how rates could move in the next couple of decades.

And if the cash rate does creep up, the potential savings could hike as interest payments increase.

To compare the differences between the lower quartile and median values for houses in the top four most expensive Australian capital cities, check out the table below, or consider using our home loan repayments calculator.

Lower quartile vs median house values

*Source: CoreLogic and RateCity data

*Note: Assumes the average January 2020 variable principal and interest, owner-occupier interest rate of 3.88% on the RateCity database. Based on a 30-year loan term and an 80% loan-to-value-ratio.

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