This is a guest post by Ellen Orton for OpenAgent.
It’s no news that being able to afford a house in Australia is difficult, especially if you’re trying to do it alone. Although the market has cooled down substantially over the past year or so, you still need to earn a substantial amount if you want to repay your mortgage comfortably.
In Australia, you’re considered to be under mortgage stress if more than 30% of your income is going towards repayments on your home loan. If you’re paying off a home loan on you’re own, it’s unlikely that you’re staying under this threshold unless you’re making a significant amount of money.
If you’re earning the median salary in your state, chances are you won’t be able to comfortably afford a median-priced house. These figures are based on a 30 year loan at an average rate of 5.05%, after a 20% deposit has been deducted. Even in Tasmania where houses are comparatively the most affordable, over 50% of your weekly earnings would be to be going to weekly repayments.
As you might expect, Victoria, the ACT and New South Wales offer the most unaffordable property prices compared to the rest of the states and territories in Australia. In the ACT, over 70% of your pay would be going to mortgage repayments. In Victoria, a whopping 86% of your pay would be going to repayments, if you earned the median salary and bought a median-priced house. Finally, in NSW, almost your entire income (92%!), would need to be going to mortgage repayments.
With the median house price in Tasmania being the lowest, you’d need to be earning $63,440 a year, which is $19,305 above the current median salary in the state. Those in South Australia, Western Australia, Northern Territory and Queensland need to earn between $76,093 to $91,347 a year, which are all higher than the median income in each state.
Since those in the ACT generally earn substantially more than those in Victoria, mortgage stress is typically lower, even though houses are more expensive in the ACT. On average, those in the ACT need to be earning $121,680 a year, $56,808 above the median.
In the top spot, those in New South Wales need to earn a taxable salary of $124,453 in order to afford a median-priced house, $75,197 higher than the current median income.
Unfortunately, those living in a capital city have it even harder. The median weekly wage in Sydney is $815.42 whereas the estimated weekly repayment on a median-priced house is $999. This means 123% of your income would be going to paying off your home loan, making it completely impossible for someone earning the median salary to afford a house at the median price.
Even in the three cheaper capital cities, Perth, Adelaide and Hobart, over 60% of your income would have to be going to repayments. This would make it extremely difficult to afford all the other expeneses that come with living in a capital city. In Melbourne, pretty much 100% of your weekly earnings would have to be going to weekly repayments.
What does this mean for you?
It’s pretty clear that affording a median-priced house on a single median income is very difficult in most areas of Australia, particularly for those wanting to live in capital cities. Those in NSW and VIC have it the worst. Even though TAS is the most affordable, it would still be difficult to comfortably afford mortgage repayments.
As a result, if you’re looking to buy property, you most likely need to be making a substantial income or you need to be looking at properties below the median price. Of course, many Australians also opt for buying a property with a partner, making it significantly easier. Make sure you’re aware of the pros and cons of co-ownership, if this is the route you choose.
Guest author: Ellen Orton is the Head of Business Operations at OpenAgent.com.au, an online agent comparison website helping Australians to sell, buy and own property.
TFC Disclaimer: Guest posts are posted in good faith. I cannot attest to the accuracy and originality of each article. If you have any concerns about the content, please contact the author of the article outlined above.