It is now out of reach for potential home buyers earning the average income in one of Australia’s major cities to buy a home, according to a stunning new report.
Two cities in Western Australia’s south-west have been named as the fastest-growing regional areas across the country. Geraldton, Busselton and Bunbury topped the charts as the top five regional cities with house prices hitting record highs, according to data from CoreLogic. This follows the launch of direct flights from Sydney to Busselton earlier this year.
Sydneysiders with an average full-time income of $1,500 a week will need to look to income supplements, such as the increasingly important “bank of mum and dad”, to buy a property, new research from the University of Technology Sydney and the University of New South Wales has found.
The downside to this is that Sydneysiders living on average incomes will have little chance of entering the Sydney housing market if they rely solely on their income, according to one of the lead researchers, Chi-Lin Lee, a professor at the University of New South Wales.
“It is clear that the Australian dream of home ownership is becoming increasingly difficult to achieve,” Professor Lee added.
Buying a home is out of reach for those on average incomes, a new study has found. Image: NCA NewsWire/David Swift
The situation was not expected to improve either, with the research predicting that housing prices would remain unaffordable for the average Sydneysider until at least 2031.
Professor Lee said this was based on the assumption that key housing data, such as lending rates, house prices, personal income and loan-to-value ratios, followed the same patterns as Sydney residents between 2004 and 2021, as well as the absence of a major global event such as a pandemic to disrupt this period.
In conducting this study, Professor Lee and Dr Bangura looked at a potential buyer’s potential mortgage repayments over 30 years, the size of his 20 percent deposit and the average lending rate.
This was compared to areas in Sydney considered affordable based on a net cost-to-wage ratio of 30 per cent and median full-time and part-time incomes.
The report found that some apartments and units in parts of western Sydney were slightly above the rate, but no homes across Greater Sydney were affordable.
The bleak outlook for potential buyers has prompted Professor Lee to call for “meaningful housing reform” to prevent the cost of a home from rising dramatically without forcing them to tighten their belts on other necessities.
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“We may see increasing polarization in sub-market housing as gaps between neighborhoods continue to grow,” he said.
“This situation may also lead to housing poverty, as households may give up other essential activities to cover housing expenses.”
He continued to advocate for policies that include both sellers and buyers, especially for those who earn an average part-time income of about $600 a week.
“The focus is now on demand-side policies, such as the First Home Owner Grant (FHOG), which are essential to help more first-time homebuyers enter the market,” Professor Lee said.
“However, the government should consider doing more to address the supply side in the near term.”
High mortgage rates are forcing landlords to abandon their property investments. More than 40,000 rental homes in NSW were converted to private housing last year. And data from SuburbTrends shows this has hit Sydney’s inner suburbs hardest, where supply is most needed.
Possible supply-side measures include building more housing, accelerating projects, or creating subsidies for developers to allocate apartments to low- to moderate-income people.
Sydney house prices are currently at an all-time high, according to CoreLogic, rising 0.5 per cent in June alone and jumping 6.3 per cent over the 12 months to June.
This makes the increase 2.2 per cent higher than the average wage increase in March of 4.1 per cent – the latest figure available from the Australian Bureau of Statistics.
