Housing affordability in Australia has hit rock bottom, leaving many feeling locked out of the property market. With soaring home prices and stagnant wages, the dream of owning a home is becoming increasingly elusive for most Australians. The gap between income growth and home values has never been wider, and the pressure is mounting.
The Unbearable Rise in Home Prices
Between March 2020 and now, Australian home values have skyrocketed by a staggering 47.3%, increasing the median dwelling price to $872,500, according to data from Cotality’s annual Housing Affordability Report relayed by ABC. In comparison, household incomes only rose by 15%, bringing the median income to $104,390. That disparity is glaring. If you’re trying to buy a home in cities like Sydney, Melbourne, or Brisbane, good luck. For first-time buyers, the metrics look especially grim.
Even though mortgage rates have eased slightly due to interest rate cuts, it still takes a whopping 45% of household income just to service a new mortgage. This is a major burden for those who aren’t receiving parental assistance or reinvesting capital gains from previous property ownership.
The Disconnect: Why It’s So Hard to Buy a Home
What’s driving this crisis? Well, a variety of factors, including pandemic-era stimulus, historically low interest rates, and a rapid rebound in migration, have all boosted housing demand. But the supply side of the equation hasn’t kept pace. Australia simply hasn’t built enough homes to meet demand, which, combined with rising material costs and the construction industry’s struggles, has created a perfect storm.
Cotality’s report highlights a mismatch between the number of new households being formed—over a million in the past five years—and the number of new homes being built—only 880,000. This has further pushed up housing prices, making it even harder for average Australians to secure a home.
Sydney’s Struggles and Regional Differences
Take Sydney’s eastern suburbs as an example. For an average wage earner, saving up a 20% deposit on a median-priced home would take 35 years. Yes, 35 years! And that’s just to get to the point where you can start paying off your mortgage. Even once you’ve saved, the cost of servicing that mortgage would require 1.5 times your annual income. It’s no wonder that many feel like homeownership is a distant dream.
On the flip side, cities like Canberra, Hobart, and even Melbourne are offering some relief. Canberra has seen a rise in apartment construction, helping ease rental affordability, while Melbourne’s higher investment property taxes have kept prices relatively lower than Sydney. That said, Melbourne is still far from affordable by historical standards.
The Growing Divide: Haves vs. Have-Nots
The gap between property owners and non-owners is growing ever wider. Homeowners and investors, who have benefited from the price surge, can reinvest their gains into the market, further compounding the divide. The lucky few who can tap into family wealth or have significant capital gains are riding the wave, while the rest of the population watches from the sidelines, unable to keep up.
The growing wealth divide has prompted experts like Eliza Owen from Cotality to warn about the structural shift occurring in the market. It’s becoming harder for those without parental help to even get a foot in the door.
