Purchase Index for First Home Buyers

The most common questions asked by new home buyers are

  • What price property can I buy?
  • How much deposit do I need?
  • How much will my repayments be?

Home Loan Advice Centre is giving you the answers. The Home Loan Advice Centre – Purchase Index gives an approximation of a person’s property purchase capacity in NSW given their level of income and family situation – assuming no liabilities.

The Purchase Index also shows how a person’s purchase capacity varies over time. This is measured by graphing over time the change in level of income required to purchase a property of a set price ie 300K home, 400K home, and 500K home in NSW. The index was commenced in Oct 2005 and the relative incomes required for purchase of the set price properties was given a value of 100. Over time, as serviceability changes due to market forces, this index will change value – a figure over 100 indicating that a person’s purchase capacity has decreased ie more income is required to purchase a property of the same price, whereas a figure under 100 indicates an increase is purchase capacity as less income is required to purchase a property of the same price.

Purchase Index – Dec 06

UPDATE – (Tues 19 Dec 2006) The Reserve Bank of Australia raised interest rates again at the Nov 2006 meeting by 0.25% as consumer spending continued to sit above the targeted band of two-three per cent, with rising fuel and fresh fruit costs being labeled as the cause. Concern was also raised with a 30-year low in unemployment threatening the onset of a collective demand in wage-increases. This however has not significantly impacted on inflation.

Purchase index graphs and tables are currently being updated and will be released soon.

Purchase Index – Jul 06

UPDATE – (Tues 12 Jun 2006) The Reserve Bank of Australia raised interest rates at the May 2006 meeting by 0.25%. Virtually all lenders passed this interest rate increase onto customers immediately or soon after.

The purchase capacity of consumers has been adversely affected by the interest rate rise however other forces (lender policy changes) have acted to improve purchase capacity – in particular the increase of maximum loan amounts at 95% LVR and the release of 100% home loans by more and more lenders have served to counteract the effect of the interest rate rise to some degree.

The overall effect on the HLAC Purchase Index has been to slightly increase it (compared to base level since inception) ie it has gone to 103 compared to base level of 100 (Oct-2005) indicating that slightly more income is required to buy a standard priced property.

Purchase Index – Apr 06

UPDATE – (Fri 28 Apr 2006). The Reserve Bank of Australia has continued to leave rates unchanged so far this year however the bias remains upward. The Home Loan Advice Centre Purchase Index figures have again essentially remained the same ie there has been little or no change to the income a first home buyer needs to earn to purchase a $300K, a $400K, or a $500K property.

Purchase Index – Jan 06

UPDATE – (Tues 7 Feb 2006) There have been no recent interest rate moves by the Reserve Bank of Australia in the last quarter and no significant changes in the stringency of bank serviceability calculations – in fact they may have slightly eased if anything! Therefore the Home Loan Advice Centre Purchase Index figures have remained virtually the same ie there has been little or no change to the income a first home buyer needs to earn to purchase a $300K, a $400K, or a $500K property. With the recent decreases in average prices in most major cities in Australia this has resulted in fairly favourable conditions for first home buyers compared to the situation over the last few years.


We have made the information as accurate as possible so you should be able to get a reasonably close idea of your capacity from the tables. However, because numerous regularly changing factors affect these figures, they can only ever be used as a guide. We have had to make a number of assumptions (see below) to arrive at these figures such as assuming the applicant has zero liabilities (ie no other loans). The maximum property price will decrease the higher your liabilities are.

Calculations have been made by running various income levels over a large number of lender serviceability calculators and using the lender who allows the maximum loan amount at a 95% loan to value ratio (up to 500K loan amount) or 90% loan to value ration (500K to 600K loan amount).

We may be able to increase your purchase capacity above levels shown in the tables by utilizing other non-standard loan types (ie 100% home loans) or by making adjustments to the various lender’s serviceability calculators. This can only be done on a case by case basis so please speak to us about your individual situation.


  1. all calculations done assuming no other debt and zero credit card limits
  2. all loans calculated as 95% LVR loans.
  3. assumes all mortgage insurance premiums can be capitalised.
  4. incomes for joint applicants are split evenly, results may differ slightly if otherwise.
  5. maximum lend is calculated by running income figures over a number of banks serviceability calculators and using “near maximum result”
  6. repayments based on lender average standard variable rate minus 0.7% discount. Actual interest rate should be in this vicinity however is dependent which lenders customers qualify for.