Australian home prices have fallen for the second month in a row off the back of mounting affordability issues, with the income needed to buy a house or unit in major capitals at current interest rates eclipsing the amount most people earn.
Alarming figures showed home seekers needed to earn more than $170,000 a year to afford the repayments on an average house in Australia’s five major capitals, while more than $120,000 was needed to buy a unit.
Housing experts said the income requirements were too high for many buyers, who were getting increasingly priced out and dropping out of the market.
The resulting drop in demand has moderated the market, with PropTrack’s latest Home Price Index revealing national home values fell by an average of 0.08 per cent over January and 0.17 per cent over December.
SEE FULL LIST OF AUSSIE SUBURBS BY INCOME NEEDED TO BUY A HOME
Housing demand has been dropping but prices remain high and affordability stretched. Picture: Julian Andrews
Finder.com.au personal finance specialist Taylor Blackburn said home prices were beginning to exceed the level most people could pay.
“If you aren’t lucky enough to have the bank of mum and dad on your side – or significant savings to begin with – home ownership is moving more and more out of reach,” he said.
“The money required to purchase a home in every capital city is well above the average salary.”
There was considerable variance in the income required to buy a home in each state:
NEW SOUTH WALES
+ Income needed to buy in Sydney
Sydney home prices were the least affordable in the country. Home seekers required an annual income of about $292,000 to afford the repayments on a house at the city median, according to analysis from Finder.com.au.
This assumed they bought with a 20 per cent deposit, an average loan rate of 6.23 per cent and the repayments ate up less than a third of their income – meaning the buyer avoided “mortgage stress”.
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Home prices are expected to drop in the months leading up an interest-rate cut.
Sydney had 13 suburbs where buyers needed to earn more than $1m a year to afford the repayments on a typical house priced at the suburb median.
An additional 30-odd suburbs required earnings of over $750,000 a year to crack the housing market, according to the Finder.com.au study of mortgage and PropTrack data.
For some perspective, the typical Australian neurosurgeon – the profession with the highest average salary – banks about $650,000 a year.
Ray White chief economist Nerida Conisbee said declining housing affordability would have flow-on effects to the wider community.
“A lot of hospitality places struggle to get workers because they can’t get affordable housing, and that flows on to social service workers as well,” she said.
SUBURBS WHERE $1M+ IS NEEDED TO BUY A HOME:
VICTORIA
+ Revealed: what you need to earn to buy across Melbourne
Melbourne families earning less than $200,000 can no longer afford a house in the majority of the city’s suburbs at current prices, Finder revealed.
Houses in Melton where among the most affordable in Melbourne.
A salary of about $183,000 was needed to buy a house at the Melbourne median and $118,000 was needed to buy a Melbourne unit at the median price.
An annual household income of $200,000 was the minimum for a median priced house in 231 of the 443 suburbs assessed.
There were just two areas left where a family can buy a house without a six-figure income.
There were also 16 areas where buying a home required earnings of at least $500,000 a year — or to have a deposit of more than half-a-million dollars.
QUEENSLAND
+ Qld workers priced out of 846 suburbs
Buyers in over 300 Queensland suburbs needed to earn more than $200,000 a year to afford a home. For some perspective, the median weekly salary in Queensland is about $97,000 a year.
Of the 1000-odd Queensland suburbs assessed, there were just 159 where a buyer could purchase a home with a gross salary of under $100,000.
Conversely, there were eight suburbs across Brisbane, Gold Coast and the Sunshine Coast where households needed to earn more than half a million a year to buy at the median suburb price.
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The median house price in Greater Brisbane is now $979,000, which would require a gross salary of $199,000 to cover the typical monthly repayments.
SOUTH AUSTRALIA
Adelaide’s last affordable suburbs on a salary under $100k
Adelaide has morphed since the pandemic from one of the cheapest mainland capitals into a market with steep affordability challenges.
An annual income of about $173,000 is now required to comfortably afford a typical Adelaide house, while a household income of about $121,000 is needed to buy an average priced apartment.
There were also three city suburbs where half a million dollars in earnings was needed to buy the typical house on offer – something unheard of only a few years ago.
WESTERN AUSTRALIA
The housing landscape in Perth has changed markedly over the past year due to a nearly 17 per cent hike in the price of all dwellings over the past year.
Despite the incredible rise, Perth remains the cheapest of the country’s five largest cities.
Perth had the fastest growing home prices last year but prices remain the most affordable of the country’s major cities.
The median house price of $836,000 a year required an annual income of $170,000 to afford the repayments. Buying a Perth unit typically demanded a $115,000 income to be affordable.
But the city also had one of the largest gaps between the top and bottom ends of the market.
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Perth’s most expensive suburbs commanded average prices of over $3m, while the cheapest suburbs usually had prices in the range of $300,000.
