Forget “the 1%”, today’s daily instalment of less-than-ideal Sydney property news revolves around shocking new data that suggests a mere 0.1% of houses in Greater Sydney are affordable for the average Aussie. Though Sydney leads the charge with eye-watering property prices, other Australian metropolises aren’t far behind.
At this point, it barely even qualifies as news to say that Sydney’s housing market is in a bit of a shoddy state. Last week, it became clear that not only is Sydney property impossible to buy but also selling at a loss. Headlines like this, alongside seemingly endless news that the superrich continue to purchase property as if it were a casual hobby, can make for conflicted reading…
Sydney’s unaffordability crisis, even for renters, has only been further crystallised by newly released data from CoreLogic, Australia’s leading property data provider, that shows how a staggeringly small amount of Sydney’s property is actually affordable for the average Australian.
According to the report, just 0.1% of Sydney homes and 2.2% of Melbourne homes are within budget for households earning the median gross household income of $90,792. Nationally, fewer than one in five homes, or 18.3%, could be comfortably purchased by households on an average income.
Despite the recent downturn in the property market, rising interest rates have outweighed any benefits of price falls, making mortgage affordability significantly worse. “What this data is showing is the widening divide between the housing haves and have-nots,” warns Brendan Coates, Economic Policy Program Director at the Grattan Institute.
The report assumed a household earning the median gross household income, with a 20% deposit and a 30-year mortgage, then measured the proportion of housing that would offer affordable mortgage repayments according to the recognised threshold for mortgage stress: $2269 a month or lower.
CoreLogic’s Head of Residential Research, Eliza Owen, explains: “Broadly we’re seeing a bit of a shift in affordability – house price growth has outpaced wage growth and that’s created larger barriers to enter the market in terms of saving a deposit and paying stamp duty”.
When it comes to apartment units, things are better, but not paradigm-shifting. In Sydney, only 15.3% of units are within reach for the average household, while in Melbourne, the figure rises to 37.3%. However, those on higher incomes would have vastly more options and, naturally, unit living offers some significant limitations that a house does not, especially for those with young families or pets.
Coates suggests that local and federal governments need to urgently boost the supply of housing. How? By finding more land to build on and making that a priority of the National Housing Accord, while capital gains tax is simultaneously reformed.
“Most of the new housing stock needs to be in the inner and middle-ring suburbs rather than the outer areas of the cities,” he said. “Without serious action by both Commonwealth and state governments, housing affordability will get worse and the great Australian dream of home ownership will be further out of reach”.
Meanwhile, University of Melbourne Associate Professor Ilan Wiesel calls for improved rental options, saying that “improving the length of tenure and the affordability of rents would be part of the housing affordability solution.”
All in all, it makes for difficult reading, especially for those yet to get a foot on the Australian property ladder. If you’re lucky enough to have parents that are still intact and have comfortably paid off their own mortgage, maybe it’s time to open up the Bank of Mum and Dad?
If that’s your chosen move, we recommend arriving with cold beers and a bouquet at the ready…