First home buyers on $180,000 can afford only a handful of homes
“There are all kinds of flow-on effects related to commute times or people not being able to have the number of children they had hoped for.”
The research comes ahead of the Central Bank’s last meeting of the year. Following three rate cuts to 3.6 per cent in 2025, which have allowed buyers to borrow more but also put upward pressure on property prices, further cuts are unlikely.
Rawnsley modeled the share of affordable homes using the 2019-20 ABS Income and Housing Survey, which asked first home buyers how much the property they were purchasing was worth. The average purchase price at the time was $560,000, which Rawnsley said meant they likely had a household income of $150,000.
Since that survey is no longer available, it has since measured growth in first home buyer mortgage sizes, growth in the average house price and the margin from mom and dad’s bank. It concluded that the average first home buyer’s purchase price is currently $760,000 and that this buyer would need a household income of around $180,000 to pay off the loan.
“The fact that the NSW figure hasn’t changed in five years reflects that the NSW housing market has been ground zero in terms of unaffordability for the last 10 or 20 years, so it’s gotten to the point in NSW where it’s not getting any worse because it’s quite difficult for it to get any worse,” he said.
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“The Sydney market is at an incredibly challenging point – the chance of finding a property you can afford for $180,000 is one in 20, so it will continue to push more young people out of Sydney.”
He said people were increasingly being priced out of Sydney by traveling to regional NSW or Queensland, but that was becoming more difficult with prices rising overall.
Despite a recent slump in Melbourne’s housing market, buyers had a one in 10 chance of finding an affordable home.
“Even they [Melbourne] “Greenfields are moving towards that $800,000 mark, so first home buyers are probably looking at older stock in greenfields,” he said. “Or they’re going to two-bedroom apartment stock in mid-ring suburbs where they can get value for money.”
Governments are trying to increase supply but Rawnsley called for more homes within first home buyers’ budgets. For example, refunding infrastructure fees to developers if they build smaller townhouses in green areas, or allowing several new apartments to be built slightly below current design standards.
AMP chief economist Shane Oliver said the unit building boom of the late 2010s was starting to help housing affordability and more units needed to be rebuilt.
“Zoning areas for more units makes it easier for builders and developers to do the job,” he suggested. “Focusing on smaller homes rather than larger homes, more townhouses, duplexes and that sort of thing. Modular, prefabricated forms of construction for both homes and units.”
“We also need to look at decentralization and expansion from our cities into regional centers in the longer term, and working from home offers a way to do that.”
