According to a report by News Corp Australia on August 4, a new study shows that intending home buyers need to double their income compared to the early days of the pandemic to afford the average house price in most Australian cities.
This means that in many areas, homebuyers will need to earn between $50,000 and $150,000 more per year than they did in 2020 to climb the property ladder.
The ability of most Australians to buy a home has been weakened by the explosive growth in house prices and record interest rate hikes, which have dramatically changed the level of income required to repay their loans.
(Image source: News Corp Australia)
Finder.com.au analysed data from PropTrack to reveal what the minimum income new homebuyers need to make to afford to repay a median-priced home in each capital city and suburb.
This analysis is based on the typical loan interest rate charged by the lender and assumes that the homebuyer pays a 20% down payment. At the same time, it is assumed that homebuyers can avoid mortgage stress, which is when households spend more than one-third of their total income on repayments.
Research shows that in all Australian capital cities except Melbourne and Darwin, homebuyers need to earn twice as much as they did four years ago to afford an average home. According to the Australian Bureau of Statistics, average wages increased by only about 12% over the same period.
(Image source: News Corp Australia)
Graham Cooke, head of research at Finder, said the changes were alarming.
"It's no secret that housing is unaffordable, but the numbers are still staggering," Cooke said in an interview with The Telegraph, "and very few people can grow their incomes at this rate unless they change jobs or the environment changes dramatically." ”
To keep up with market changes, Sydney homebuyers need the biggest increase in income, with the annual income required to buy a median home increasing by around $148,000.
In 2020, with the average loan interest rate charged by banks at 2.92%, an annual income of $130,000 was enough to buy a median home in Sydney ($970,000). Now, with the median home price in Sydney at $1.4 million and the average interest rate for owner-occupiers rising to 6.27 per cent, new buyers need an annual income of $278,000 to afford to repay. But Adelaide and Brisbane saw higher percentage gains.
Buying a median home in Adelaide now requires an annual income of around $148,000, a 131% increase from the $64,000 required in 2020.
A median home in Brisbane requires an annual income of $166,000, up 128% from the $73,000 needed four years ago.
(Image source: News Corp Australia)
It is worth noting that the change in the income required by apartment buyers is not so extreme, with increases ranging from 50% to 75%. Even in Melbourne, although the change is not as great as in other state capitals, the increase in income needed to afford to repay is still significant.
In 2020, an annual income of just under $100,000 was enough to buy an average house in Melbourne. Today's homebuyers need about $172,000 a year, about $73,000 more than four years ago, or 74 per cent.