Alarming salary you now need to afford a home across Australia

Home seekers have been splurging on real estate at auction in recent months as buyer demand has heated up. Picture: Sam Ruttyn

Aussies will now need to earn about $200,000 a year to be able to afford a typical house in our capital cities after another explosion in property prices following this year’s interest rate cuts.

This is the finding of alarming new research, which measured the income required to afford the mortgage repayments on houses priced at the capital city median price.

The Finder.com.au analysis of PropTrack and ABS loan data exposed a brutal reality for aspiring homeowners, examining the burden repayments at current prices would have on households’ finances.

It showed about 83 per cent of suburbs across the country are unaffordable for those earning the average pre-tax household income (about $100,000 a year) – a marked change from only a few years ago.

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Rate cuts have driven up competition for homes, which in turn has driven up prices. Picture: Sam Ruttyn

The findings suggested the Reserve Bank’s moves to cut the cash rate this year – first in February and then in May – have made it harder for new buyers to get into the market by raising prices.

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National home prices are currently about 5 per cent higher than they were at this time last year.

Much of that price growth occurred after the February rate cut as improved borrowing capacity pulled more buyers into the market and, with competition rising, pressured them to make higher offers.

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Above figures represent household income and assume a 20 per deposit and average interest rate.

Finder.com.au insights manager Graham Cooke said even those who were earning what used to be good incomes were now struggling to afford property purchases.

“It’s a sobering reality that for many suburbs, even a six-figure income isn’t enough to comfortably service a mortgage,” he said.

“If you’re a solo buyer – it’s even tougher. For many, purchasing property is only possible with a second income or financial support from family.

Finder’s analysis showed $203,000 was the minimum household income required to buy the average house in our eight capital cities without going into mortgage stress.

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Finder’s head of consumer research Graham Cooke said the figures showed buying a home solo was becoming near impossible.

Mortgage stress was deemed a situation where families were spending more than 30 per cent of their income on repayments, viewed as an unsustainable amount over the long term.

Income requirements were even higher in Sydney, with house buyers needing to earn just under $300,000 to afford a house priced at the city median of $1.56 million.

Brisbane households needed about $201,000 a year to afford a house at the city median of $1.06 million, while a minimum $185,000 was needed in Melbourne to buy at the city median of $983,000.

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This assumed the buyer had a 20 per cent deposit, used a 30-year loan with an interest rate of 5.83 per cent – the current industry average – and was an owner occupier.

Adelaide houses, once heralded as a refuge from soaring eastern seaboard prices, required an annual household income of nearly $173,000 to be affordable. The Adelaide median is now $916,000.

A similar annual household income was required for an average Perth house to be considered affordable: about $174,000.

Apartment prices were considerably more accessible – although still above the average national income.

Much of the recent growth in prices has come since RBA governor Michele Bullock announced cash rate cuts. Picture: Christian Gilles / NewsWire

A unit at the capital city median price was considered affordable for those on a household income of $131,000 a year. Nationally, the average household income is about $105,000 annually.

Buying the average unit in Melbourne, Perth, Canberra and Adelaide required a minimum household income of about $110,000-$120,000 to be affordable.

In Brisbane the minimum income needed to afford an average unit was nearly $135,000 a year, while in Sydney it was about $162,000.

Units remain a more affordable options for most Australians.

REA Group economist Anne Flaherty said affordability remained a considerable challenge for buyers across the country.

She said the high level of income needed to get into the market was putting something of a brake on the speed of home price rises, but they were nonetheless continuing due to recent interest rate cuts.

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