Higher interest rates and cost-of-living pressures are forcing mortgage holders earning half a million dollars to consider moving back in with their parents.
Theo Chambers, CEO of Shore Financial, said even young couples with a combined household income of $400,000 to $500,000 were struggling to pay their mortgages of more than $2 million in areas with Sydney especially if they had children in daycare.
“There are a lot of people moving back in with family so they can get rid of childcare costs, rent out their property, they’re not selling.” Mr Chambers told the Sydney Morning Herald.
‘They can see that in a few years, when their children go to school, everything will be easier. While their children are still in daycare, it is so expensive for them to still work.’
He said high-income couples had bought when interest rates were as low as two per cent – a figure that now seems a distant memory – and would have thought ‘we could easily afford a $3 million house in Bondi’.
However, because they have had children and are not eligible for child care subsidies, they have to pay $7,000 in monthly costs.
Without being able to refinance their mortgages tThey have eliminated discretionary spending and vacation time and reduced it to just one car.
Mr Chambers said these types of people feel ‘stuck’ and that despite doing all the ‘right things’ and ‘ticking all the boxes’, they were still struggling.
Higher interest rates and cost-of-living pressures are forcing couples earning half a million dollars to consider moving back in with their parents (stock image)
Mortgage choice Dee Why director James Algar said she was dealing with high earners who had used up their savings to keep their mortgage afloat.
She said that while most of these people were not in real financial trouble or considering a sale, they are feeling the pressure.
So far, she said only a few are downsizing to reduce mortgages or relocate.
Others are forced to cut back on recreational activities or other expenses for children.
Demographer Simon Kuestenmacher said housing affordability is determined by the ratio of house prices to incomes.
‘Even the rich cannot easily afford a house. It’s not the most tragic… [But] The situation for people in the middle is absolutely dire,” he said.
Mr Kuestenmacher said this led to young people becoming alienated because they look at the economic system and say it ‘doesn’t work for me’.
According to a 2024 Demographia report, Sydney, Melbourne and Adelaide are among the 10 most unaffordable cities in the world, with Hong Kong topping the list.
Theo Chambers, CEO of Shore Financial, said even young couples with a combined household income of $400,000 to $500,000 were struggling to pay their more than $2 million mortgage (stock image)
The average cost of a home in Australia has doubled in just thirteen years, from less than $500,000 in 2011 to almost $1 million in 2024.
A Corelogic Housing Affordability Report from ANZ has found that house prices in Sydney now cost ten times the average salary.
In July, research led by property experts Mustapha Bangura and Professor Chyi Lin Lee found that the average full-time income was no longer good enough to enter the housing market anywhere in Sydney.
The pair, which was nowhere to be found in Sydney, was affordable based on the 2021 weekly median income of $600 for part-time workers, as well as the weekly median income for full-time workers of $1,500.
Proximity to the city was found to be a factor in the research, with it becoming more challenging for potential homebuyers the closer the property is to Sydney’s CBD.
Interest rates were held at a 12-year high of 4.35 percent at the Reserve Bank of Australia’s last meeting in early December.
The cash rate is now higher than the equivalent policy rate in New Zealand and Canada as other first world countries receive aid.
Governor Michele Bullock gave a strong hint that rate cuts could be months away as inflation is still too high ahead of next year’s elections.