Australians looking to buy a home in a major city must save for 14 years for a 20 percent mortgage, new data shows.
Those looking to enter the real estate market in most major cities will have to save at least a decade to afford a home with a backyard, according to an ANZ-CoreLogic housing affordability report released Monday.
That’s based on the median or median household income that equates to what couples in each city usually earn together to get the middle-market home.
While rising interest rates have pushed prices down, homes in Australia’s largest cities are still unaffordable unless those looking to buy their first home consider a more distant capital.
Otherwise, a working couple earning six figures together will continue to struggle as high immigration pushes prices back up during a rent crunch.
An ANZ-CoreLogic housing affordability report released on Monday revealed that it now took 14.3 years to save for a 20 per cent mortgage in Sydney in March 2023, even with a six-figure income (pictured is the Sydney Harbor Bridge taken from observatory hill)
Sydney
Those looking to buy into Australia’s most expensive major city typically need to spend 14.3 years saving on a 20 per cent mortgage – the level of savings needed to avoid paying expensive mortgage insurance.
Saving the required $250,751 is a big ask in Sydney where the average house price is $1,253,759.
But a year ago it was even worse, when it lasted 17.1 years to save for that deposit, when interest rates were still at a record low of 0.1 percent.
Since then, the Reserve Bank’s 11 rate hikes in a year have led to a 12 percent fall in prices.
The savings calculations were based on a prospective home buyer setting aside 15 percent of his salary each year to meet that savings goal.
In Sydney, the median weekly household income was $2,077, or $108,000 per year, in the 2021 census.
Australia’s most overcrowded city is so unaffordable that a new borrower would spend more than half, or 51.6 per cent, of their income on mortgage payments, and that’s based on the combined value of homes and units.
Melbourne
Melbourne was slightly less prohibitively expensive, taking 11.4 years to save for a mortgage in a city where the median home price is $907,220, after a 10.1 percent annual decline.
This is in a city where $1,901 is the average weekly household income, which equates to $98,852 per year.
Brisbane
Brisbane took 10.1 years to scrape together the necessary funds, in a city where the average house price is $781,881, after falling 11.8 percent over the past year.
The Queensland capital has an average weekly household income of $2,068, or $107,536 per year.
Perth
Perth was a little more affordable with potential borrowers taking 7.7 years to save in a city where the median home price is $599,240 after a small 1.5 percent increase that has defied interest rate hikes.
Melbourne was slightly less prohibitively expensive, taking 11.4 years to save for a mortgage in a city where $907,220 is the median house price, following a 10.1 per cent annual decline (pictured is Flinders Street station lit up in purple for the coronation of king Charles)
The resource-rich city has an average weekly household income of $1,865, or $96,980 per year.
But in most parts of Australia it takes at least ten years to save for a mortgage.
Hobart
While Hobart’s median house price of $692,361 is much cheaper than Sydney or Melbourne, it still takes 10.8 years to save for a down payment.
That’s because the city’s median household income is $1,542 per week or $80,184 per year.
The typical combined salary for a working couple in Tasmania is less than Australia’s average full-time salary of $94,000 for a single person.
Adelaide
Adelaide is in a similar position, with a savings period of 10.8 years in a city with an average house price of $697,909 and an average weekly income of $1,365 or $70,980 per year.
Perth was slightly more affordable with potential borrowers taking 7.7 years to save in a city where the median home price is $599,240 after a small 1.5 percent increase that has defied interest rate hikes
Darwin, with a median house price of $573,534, is the most affordable market in the capital, taking just 6.5 years to save for a mortgage (pictured are Mindil Beach markets)
Canberra
Canberra’s median house price of $946,463 is expensive by national standards, but saving for a down payment typically takes 9.6 years in a city where median weekly income is much higher at $2,419 or $125,788 per year.
Darwin
Darwin, with an average house price of $573,534, is the most affordable capital market, and it takes just 6.5 years to save for a mortgage in a place where the average weekly household income is $2,209 or $114,868 per year.
The alternative
Young Australians struggling to save for a 20 percent down payment can buy a cheaper apartment or apply for the federal government’s First Home Guarantee.
Applicants for the First Home Guarantee only require a five percent down payment, with the taxpayer underwriting the rest.
House prices rose in every state capital last month due to an influx of international students and skilled migrants.
Looking ahead, given the low vacancy rate and high immigration, rents are likely to continue to rise sharply, the report said.
“Overseas migration patterns suggest demand will remain skewed towards Melbourne and Sydney markets, while expensive regional markets are likely to level off against affordability constraints.”
The national rental vacancy rate is just under 1.1 percent.
The Treasury Budgets papers forecast a record net annual overseas migration of 400,000 in 2022-23, followed by another 315,000 in 2023-24, with the bulk of visitors settling in Sydney and Melbourne.