How To Buy A Million-Dollar Property

Many homes are now priced above $1 million. Recent data from CoreLogic reveals that nearly 30% of Australian suburbs have a median property value of over $1 million.

In this article, we’ll cover everything you need to know about buying a million-dollar property, from income and deposit requirements to strategies like using a guarantor or purchasing with a partner to make it more affordable. With the right planning and support, buying your first home is still within reach.

How Much Deposit Do You Need For A Million-Dollar House?

Lenders typically prefer a 20% deposit for a $1 million property, which amounts to $200,000. However, it’s possible to secure a home loan with a smaller deposit, though Lenders Mortgage Insurance (LMI) will be required. Below is a breakdown of the deposit amounts needed at different percentages and whether LMI will be charged.

In addition to your deposit, lenders expect you to set aside around 5% of the property’s value to cover upfront costs such as stamp duty, mortgage fees, and other related expenses.

How Much Income Do You Need For A $1 Million Property?

While the exact income needed for a $1 million property depends on factors like living expenses, type of income, existing liabilities, and home loan type, a general guideline is to keep your home loan repayments below 30% of your annual income.

With a typical 20% deposit of $200,000 on a million-dollar home, resulting in an $800,000 loan, you’d need a household income of $170,000-$200,000 annually to manage repayments comfortably. This assumes current interest rates of around 6%, which would keep your mortgage payments within a sustainable portion of your income.

Strategies To Afford A $1 Million Home

Here are some strategies you can use to afford a $1 million home in Australia:

1. Have a guarantor

2. Buy together with a partner

3. Use equity from an existing property

4. Pay LMI if you’re borrowing over 80%

5. Boost Your Income

Have A Guarantor

One of the best ways to get into the property market sooner is by using a guarantor. This typically involves a parent or family member offering part of the equity in their home as security for your loan. This strategy can reduce the need for a large deposit and help you avoid LMI.

This option may not be for some, however, as it requires a family member to put their property at risk, which might not be feasible or comfortable for some families. It’s important to be well-informed and consider the risks before going this route.

Buy Together With A Partner

Pooling resources with a partner can boost your borrowing capacity. A combined income allows you to afford a higher-priced property and you can also split the deposit and ongoing costs, making it easier to handle repayments.

Use Equity From An Existing Property

If you already own a property, you can use the equity you’ve built up in it as part of your deposit for your next home. This can be a powerful tool for those moving up the property ladder, allowing you to purchase a higher-value home without needing to save an entirely new deposit.

Pay LMI If You’re Borrowing Over 80%

If you don’t have a 20% deposit, you can still buy a million-dollar home by paying Lenders Mortgage Insurance (LMI). To make the payment more manageable, LMI can be capitalised, meaning the cost is added to your loan amount rather than being paid upfront. This way, you won’t need to save extra for LMI before purchasing the property; however, keep in mind that this increases both your loan balance and your interest payments over time.

Boost Your Income

Increasing your income can improve your borrowing capacity and make higher mortgage repayments more affordable. This could involve seeking a higher-paying job, taking on additional work, or generating passive income streams.

Costs To Expect When Buying A Million-Dollar Home

Purchasing a million-dollar property involves several expenses beyond the sale price. Here are some common costs you should anticipate:

For a detailed breakdown of these costs, please visit our Property Purchase Costs Calculator.

In addition to stamp duty and council rates, you’ll be liable for land tax when purchasing a million-dollar investment property, which is based on the land’s value. Each state has their own threshold and, for foreign buyers, an additional FIRB fee of $88,500 applies for properties valued between $1 million and $2 million. This fee is required for approval to purchase Australian real estate as a foreign investor.

Should I Buy One $1 Million Property Or Two $500K Properties?

Your decision between purchasing one $1 million property or two $500,000 properties should hinge upon your investment goals and financial circumstances. Buying a single, high-value property can offer greater potential for capital growth, especially if it’s located in a prime area. It simplifies management and may provide prestige or personal satisfaction if used as a primary residence. This approach concentrates your risk in one asset, however, and luxury properties often yield lower rental returns relative to their value.

On the other hand, investing in two $500,000 properties allows for diversification across different locations or property types, which can mitigate risk. Mid-priced properties typically attract a larger pool of tenants, potentially offering higher combined rental income and better cashflow. This strategy involves managing multiple properties, however, which can increase your time commitment and expenses. Ultimately, the best choice depends on whether you prioritise capital appreciation or steady income, your risk tolerance, and your capacity to manage one or multiple properties.

Choose a $1 million property if:

• You prioritise potential capital growth over immediate rental income.
• You prefer simplicity in management.
• You are comfortable with higher risk concentration.

Choose two $500,000 properties if:

• You want to diversify your investment and spread risk.
• You aim for higher rental yields and better cashflow.
• You are willing to manage more properties and tenants.

Where Can I Find Million-Dollar Suburbs In Australia?

CoreLogic data shows that, as of August 2024, 29.3% of Australian suburbs had a median property value above $1 million. This is up from 21.7% in January 2023. This expansion reflects the growing influence of mid-sized cities and regional areas entering the high-value property market.

If you’re looking to invest in a million-dollar property, there are plenty of options across both metropolitan and regional areas. Here’s a breakdown of key regions and popular suburbs:

When searching for a million-dollar property, consider factors such as proximity to the city, lifestyle preferences, investment potential, and future growth prospects. Work with a knowledgeable real-estate agent who specialises in high-value properties to get access to exclusive listings and insider market information. Stay updated with property market reports to make informed decisions.