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Rising Housing Costs in Australia: A Financial Strain on Households
Recent research highlights the substantial income required for Australians to manage their mortgage payments comfortably. The term "comfortable" is interpreted as being able to pay off the mortgage while retaining at least 70% of one’s income for other expenses.
An analysis conducted by Jarden, alongside a poll of over 7,600 Yahoo Finance readers, revealed that 52% of respondents allocate more than 40% of their salaries towards mortgage repayments. To avoid what is termed mortgage stress, a household needs to earn approximately $161,247 annually, representing a 40% increase over the average salary. When average wages are measured against median house prices nationwide, Australians are currently dedicating about 42.4% of their income to mortgage payments. This is a significant rise compared to 24.1% in March 2020.
Soaring Home Prices
The situation has been exacerbated by a dramatic surge in housing prices over the past five years, with a remarkable 51% increase noted by Mozo. Consequently, the amount required for a 20% deposit has surged by $66,160.
Sydney: A Major Concern
In Sydney, the situation is particularly dire, with residents spending an alarming 57.9% of their income on mortgages, up from 32.5% a decade ago. To sustain a mortgage in Sydney without financial strain, one would need to earn over $235,082 annually. However, with the city’s median household income at $121,721, a mere 2.2% of suburbs would be within financial reach for most residents.
Comparative Affordability Across Cities
While Sydney is on the higher end of the spectrum, Melbourne presents relatively better conditions, with residents committing 36.6% of their income to their home loans. Here’s a breakdown of housing affordability across major Australian cities:
- Melbourne: 36.6%
- Adelaide: 47.4%
- Brisbane: 44.8%
- Hobart: 40.5%
- Perth: 37%
For reference, given the recent surge in housing prices, reaching a 20% deposit now takes an average of 10.6 years to save. In Sydney, this timeframe extends to 13.1 years, while Darwin residents are the luckiest, needing just 5.2 years.
Financial Pressures and Market Dynamics
Tim Lawless, the research director at CoreLogic, stated that an imbalance between housing supply and demand, compounded by elevated living costs, high-interest rates, and low savings rates, has intensified the financial strain on many Australians, particularly first-time buyers and renters.
In summary, the housing market in Australia continues to impose heavy financial burdens on households, with rising prices making it increasingly challenging for many to achieve homeownership without substantial income levels. Those wishing to navigate the housing landscape should consider these dynamics and the financial implications of current market conditions.
