Yahoo Finance Incredible salary Aussies need to comfortably buy a home
Households will have to be earning a lot to purchase a house or apartment with enough left over for everything else.
The eye-watering salary Australians need if they want to buy a home without experiencing mortgage stress has been revealed.
Purchasing a property is an intense experience for many Australians at the moment. Not only are interest rates intimidating, but competition with other buyers and the rising cost of living make it tough to get the keys to your own place.
The RBA decided this week to keep interest rates on hold at 4.35 per cent for March. However, after 13 rate hikes in 18 months, if you want to win an auction and keep your head above water, then you’ll need at least 1.6 times the average income.
Are you struggling with mortgage stress? Email stew.perrie@yahooinc.com
Mortgage stress kicks in when a homeowner is spending more than 30 per cent of their wage on their loan. According to new data from Redbridge, nearly half of respondents are experiencing this and one-third are spending more than 40 per cent of their salary on their home loan.
For people living in Sydney - where the median house price is $1.36 million and median unit price is $767,250 - a person, couple or household would have to be earning at least $293,578 a year to afford a house without having mortgage stress. A salary of $165,623 would be required to buy a unit ‘stress-free’.
The average income of people living in Sydney is $98,218.
When extrapolated to include all eight capital cities, but retaining the same average income, the median house price is $866,000 and unit price is $620,000.
Households would need an income of at least $186,940 to comfortably afford a house and $133,837 - 1.6 times the average income - for an apartment to ensure they don’t plunge into mortgage stress.
This data was based on a 25-year standard variable-rate mortgage with a 20 per cent deposit, and the owner paying principal and interest at 6.49 per cent.
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How much you need to earn to buy a house in Australia compared to average wage
Sydney was the most expensive in the data set, while Darwin was the most affordable, with residents needing to earn $124,339 to stay below the 30 per cent limit, which is 1.3 times the average salary in the city.
Greens Housing spokesman Max Chandler-Mather said this data showed the government needed to do more to help Aussies wanting to own a home.
“The only way we are going to fix this crisis is if Labor finally works with the Greens to phase out the massive tax handouts for property investors, like negative gearing, that are denying millions of renters the chance to buy a home,” he said.
“Owning a home has become an ‘impossible dream’ for millions of Australians.”
Annual income to afford house
Sydney: $293,578
Melbourne: $189,962
Adelaide: $163,627
Brisbane: $178,090
Canberra: $205,073
Hobart: $148,948
Perth: $140,313
Darwin: $124,339
Perth couple Alison Naing and her partner Andrew know mortgage stress all too well. They feel they are trapped in “mortgage prison” because high interest rates have made it nearly impossible to refinance their loan.
They told Yahoo Finance their monthly repayments went from $951 in December 2022 - when their construction loan was fully released - to $2,350 this March - an increase of $1,399 per month.
“Because we were in the midst of construction, all we could do was sit back and watch interest rates go up and up and up, while paying for our rent and also our mortgage at the same time,” Alison said.
In order to refinance and get a lower interest rate, the couple has to wait for the equity in their property to reach 20 per cent so they can avoid paying LMI.
They managed to change jobs to get better pay, but their loan is still very much front of mind.
Their story of struggle is one of many in Australia. Roy Morgan found last year that a record 1.5 million Aussies were at risk of mortgage stress, which exceeded the levels set in May 2008 during the global financial crisis.
A further 1 million mortgage holders were also considered “extremely at risk” of stress.
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