Due to these figures, Residex managing director John Edwards said that high property prices, interest rate hikes and the European economic crisis have contributed to this sharp drop. He also added that though it is normal for clearance rates to drop during this time, a ten percent fall since the last interest rate hike is surprising.

Edwards also mentioned that the price drop in the property market’s lower end during the first half of the year means that the poor buyers might be stressed in finding a property that would suit their means while the medium and upper niche of the property market may continue to perform well.

To deepen the misery, property prices in Sydney increased by 17 percent from April 2009 to April 2010. Edwards claimed this figure to be a remarkable one since the average annual price increase in Sydney is 6.7 percent. This significant increase contributes to the decrease of the clearance rate. Cooley Auctions alone have their clearance rate take a nosedive from 80 percent to 50 percent.

Auctioneer Damien Cooley said that the auction market is losing steam and that biddings have not been as hotly contested as they were in February, March and at the start of April. Also, Yoness Blackmore felt the auction market slowdown after her house in Manly was passed by at $1.125 million. Her three-bedroom property is in a popular suburb that is close to shops, beaches and transportation routes.

Because of which, Blackmore felt disappointed because she has psyched herself up that the property will be sold but she felt that the listing for the property is a case of bad timing due to holidays in school and the Anzac Day. However, their property now has two potential buyers since it has been passed. These two buyers have also experienced problems in selling properties of their own.

However, a property in Fairlight was sold for $1.44 million last week. This closing rate is $240,000 higher than what the property vendor paid 11 months ago. Also, a two-storey property in 24 Arthur Street was sold for $1.44 million after it was bought for $1.2 million in June 2009. The selling agent for both homes, Cunningham Property’s Georgi Coward, was amazed that the Blackmore property was passed.

However, Coward commented that prospective property buyers are not jumping so much into property buying for people tend to be more cautious during interest rate hikes. Another odd example of how the auction market is working is the two-bedroom brick home in Kyle Bay that was sold for $1.13 million though it was just worth $418,000 in 1997.

McGrath St. George selling agent Sasha Tavic finds the developments crazy and she said that most buyers cannot keep up with the big increase in property prices and there is no end in sight for it. She also added that this growth scares potential property buyers.

Fixed Rates
Many families look for a stable home loan and what’s appropriate for them is a fixed home loan.  A fixed rate is generally higher than the variable however, you have the security of knowing what your repayments will be for the fixed term.

Variable rates
Some would go for variable rates because of the interest rate is generally lower.   However, the repayment can go up if the Reserve Bank of Australia lifts interest rates. 

Split Loan
With the fixed and variable home loan both having pros and cons, many first time borrowers opt to go for a split home loan. This type of home loan has both the stability of a fixed home loan and the flexibility of a variable one.

Deposit
The deposit that you will require will depend on the type of property that you want to buy and the home loan type that you require. The usual deposit rate is within five to ten percent of the total property value and, some lending companies would like to see your saving history for up to six months.

Other costs
Aside from the deposit, you will have to cover other costs such as establishment fees, transfer fees, legal fees, loan application fees, mortgage insurance and the stamp duty. The values of which vary from one lender to another. Meanwhile, the value of the stamp duty varies per state.

However, first home buyers are not the ones to be blamed for they take up less than 10 per cent of all house purchases. Also, first time buyers are price-sensitive for they tend to borrow a big chunk of the purchase price as compared to returning home buyers who have more equity.

Many first home buyers worry that they might pay their mortgage should prices arise as well. They also purchase at the lower end of the market that a rise in their property value does not shake up the median price movements.

If for example, a novice buyer bought a $300,000 house that has a yearly property value increase of 7 per cent, the $21,000 increase barely affects the median price.

On the other hand, investors account for 30 per cent of property buyers for their cash flow is based on negative-gearing taxes and rental income. Usually, they tend to purchase within the middle of the market. Thus, their transaction put more weight on the median value.

For example, an investor bought a $500,000 property with an annual growth rate of 7 per cent, it will incur a $35,000 value hike after a year. And because investors take up a large portion of the property buying market, their deals dictate median price growth.

Returning home buyers should shoulder the blame to for they make up 60 per cent of the market. And since they have equity to show for, they have the capacity to buy middle or upper-priced properties.

If a returning buyer bought an $800,000 property with a 7 per cent annual growth, the property becomes more expensive by $56,000 after a year. This growth is three times bigger than what first home buyers can achieve from a $300,000 property.

For information on the first home buyers grant, or to apply for a first home loan then click here.