- A pay rise of almost $150,000 may be needed to buy a house in Sydney
- Perth was more affordable but a pay rise on the average income may still be needed
- The analysis considers the average income, median house price, and mortgage stress
Buying a home is tougher than ever, with many breathing a slight sigh of relief following yesterday’s interest rate announcement: the cash rate to remain at 3.6%.
The 10 consecutive rate hikes prior have put the pinch on household budgets, with many either priced out of their desired bracket or simply pushed out of the housing market altogether.
The latest data from Canstar shows you may need to ask for a pay rise of between $10,000 to well over $100,000 to not put you into mortgage stress; mortgage stress means spending 30% or more of your after-tax income on mortgage repayments.
Canstar analysed how much your salary needs to be to comfortably purchase a home in the capital cities. This takes into account the 20% deposit and avoids mortgage stress.
Annual income needed to afford a house in each capital city
|
Capital City |
Median Property Value | Deposit (20%) | Monthly Repayment | Average Annual Before-Tax Income | Before-Tax Income to Avoid Mortgage Stress |
Difference |
|
Sydney |
$1,230,581 | $246,116 | $5,985 | $94,130 | $239,480 | -$145,350 |
| Canberra | $944,809 | $188,962 | $4,595 | $104,993 | $183,861 |
-$78,868 |
|
Melbourne |
$898,644 | $179,729 | $4,371 | $93,283 | $174,898 |
-$81,615 |
|
Brisbane |
$772,020 | $154,404 | $3,755 | $91,556 | $150,250 | -$58,694 |
| Adelaide | $694,818 | $138,964 | $3,379 | $86,216 | $135,205 |
-$48,989 |
|
Hobart |
$691,859 | $138,372 | $3,365 | $82,493 | $134,645 | -$52,152 |
| Perth | $593,385 | $118,677 | $2,886 | $103,402 | $115,478 |
-$12,076 |
|
Darwin |
$582,415 | $116,483 | $2,833 | $90,693 | $113,358 | -$22,665 |
| Combined Capitals | $851,386 | $170,277 | $4,141 | $94,000 | $165,695 |
-$71,695 |
| Source: Canstar. Prepared on 03/04/2023. Median Property Value based on the CoreLogic Home Value Index as at 31 March 2023 statistics. Monthly repayment assumes principal & interest repayments made over 30 years, based on the average owner occupier variable rate of 6.13% (based on loans available for $500,000, 80% LVR and principal & interest repayments in Canstar’s database; excludes introductory and first home buyer only home loans). Average Gross Income based on ABS Average Weekly Earnings November 2022 (full-time, adult, ordinary time earnings). | ||||||
Canstar’s Editor-at-Large and money expert, Effie Zahos said the rapid rise in the cash rate may have put a stop to the upward trajectory of property prices however property prices have started to rise again. Zahos quoted CoreLogic figures showing national home values are up 0.6% in March. Recent PropTrack data likewise showed a gradual rise in some areas, with the national value up 0.13% for the month and 0.49% for the year.
“It’s unusual for property prices to increase as interest rates are rising,” said Zahos, adding, “One would expect that interest rates would need to be cut for property values to rise again… .” Zahos reasons that several factors have led to the unusual outcomes, including low residential housing supply and surging migration. A recent PropTrack report and CoreLogic report both noted similar reasons as likely drivers of housing prices.
“It’s aspiring homebuyers who could be caught in mortgage stress straight out of the gate with higher property prices being matched with higher interest rates. Rising property prices are cementing the fact that a single-income earner can’t buy a home on their own wage without incurring significant mortgage stress,” said Zahos.
“Roy Morgan reported just last week that in February more than 1.2 million mortgage holders were considered at risk of mortgage stress and if the Reserve Bank raises the cash rate by another 0.25 percentage points in April to 3.85 percent the number could rise to 1.5 million.”
“Potential homebuyers will need to consider all their options. Having two incomes can help ease mortgage stress. Buying a unit instead of a house can reduce the amount of income required to service a debt and shared equity schemes are also an option for buyers wanting to enter the property market. The bank of mum and dad is also a possibility but as interest rates rise this bank is fast closing as the number of parents able to assist has declined.”
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