The most expensive cities in Australia to live – as house prices begin to creep up

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Australia’s property market is fast becoming more expensive for the first time in years, with hard-working families priced out or left with nothing to survive on.

House prices have bounced back across Australia, and are threatening to cause another crippling affordability crisis amid stagnant wages.

The average family is forced to spend more than half of their wages on a mortgage in some state capitals, as house prices rocketed by 5.7 per cent in Sydney alone.

A house is deemed unaffordable if it costs more than 30 per cent of a person’s income to pay for the mortgage.

In Australia, the average national income for all workers is $1,634 a week, but this takes into account the highest wages in the country – meaning often workers are left with far shallower pockets.  

Thomas Devitt, an economist at the Housing Industry Association – which issued the new figures – warned ‘the scene was set for another affordability crisis’. 

‘The options for new home buyers are increasingly restricted to tiny inner city apartments, large house and land packages in the distant outskirts, or exorbitantly expensive housing in the middle ring,’ he explained.

Perth is the most affordable city in Australia to buy a house or apartment, with mortgages costing just 23.3 per cent of the average income.

This means that just one full-time worker can happily afford to buy a home.

The figures are based on a mortgage where a person borrows 90 per cent of the house’s price, with 10 per cent given upfront as a deposit. 

Sydney is the least affordable place to live, with the average Australian forced to fork out nearly two average incomes to comfortably pay for a mortgage.

House prices rose by 5.7 per cent in December, making the average home cost $1.15m – with units not far behind at $735,000. 

Sydneysiders need to stump up more than half of their salary every month to pay for the average $4,147 a month mortgage repayments, making it far out of reach for most people.

This means a full-time worker paying a mortgage in Sydney and earning the average state income would be left with just $1,271 a month to survive.

Likewise for Melbourne, hard-working Australians are forced to cough up 1.4 incomes to get a mortgage.

House prices in the Victorian city have hit an average of $901,951, a rise of 5 per cent. 

During the second half of 2019 the median home price grew considerably faster than earnings in the city.

Even the average unit will cost families $549,701, an increase of 5.6 per cent. 

This brings to an end the uninterrupted improvement in affordability for the first time in three years.

Despite this, it is still more affordable than 20 years ago, the Association claimed.

The most difficult barrier to home ownership, it said, is being granted a mortgage in the first place. 

It is also increasingly difficult for people to save a deposit and meet the ‘increasingly stringent requirements of lenders.’ 

Canberra is the third least affordable city to live, with house prices of $788,621 and mortgages needing 1.2 average incomes.  

The housing market in the capital has been tightening recently with the support of population growth and infrastructure investment, the report said. 

Affordability has deteriorated, despite lower interest rates and ongoing earnings growth interrupting this trend temporarily.

 

In Brisbane, house prices have risen by a more modest 1.3 per cent to $577,664, meaning families need 1.1 incomes to affordably service a mortgage.  

With average monthly mortgage repayments of $2,414, it is noticeably cheaper than other capitals.

But affordability has deteriorated by 0.3 per cent on the back of price increase, offsetting even Queensland’s above-average earnings growth.

A unit costs an average of $377,549, an increase of 3.4 per cent as families scramble to snap up holiday homes.  

In the port city of Hobart, one incomes is needed to comfortably pay for a mortgage.  

Tasmania has been undergoing an economic revival, the report explained, with strong population growth and a lot of detached house construction driving activity. 

But affordability is going down, with prices rocketing for both units and houses.

The average unit now costs $441,104 – an increase of 15.2 per cent – with a house costing $530,570 – an increase of 8.5 per cent.  

For those dreaming of buying a home in Adelaide, it is now the most affordable it has been since 1999.

It needs one income to service a mortgage, with average prices of $542,974 for a house and $306,327 for a unit.

Its affordability improved thanks to ongoing earnings growth and the small benefit of a final interest rate cut.

One of the two most affordable cities in Australia, living in Darwin needs just 0.8 average incomes to comfortably pay for a mortgage.

This means just a person needs to use just 24.1 per cent of their income on a mortgage, leaving them better off than nearly everywhere else.

The average monthly mortgage repayment in the city is just $1,732 – the cheapest of any capital city in Australia.

House prices are an average of just $509,452, half that of Sydney, or $286,249 for a unit. 

 

Perth is the most affordable housing market in the country, with prices having been falling ever since the mining boom.

Only 0.8 incomes are required to service a mortgage in Perth, compared to more than two incomes at the peak of the boom, which forever changed the area’s economy.

It has enjoyed earnings growth of 2.1 per cent and an increase of just 0.7 per cent in the cost of buying a house.

The city has average mortgage repayments of $1,938 per month. 

 The Housing Industry Association collated the figures for its Affordability Report.

Its economist Mr Devitt explained: ‘In combination with the natural turning point of the market, economic stimulus and post-election certainty, along with ongoing strong population growth, have helped support housing demand and stabilise home prices.

‘In Sydney and Melbourne, prices have bounced back, more than offsetting any ongoing earnings growth and the single interest rate cut that occurred in October, causing affordability to worsen for the first time since 2017.’

‘All of this stimulus was aimed at supporting the economy more broadly, but also helping soften the landing for the housing market and preventing house construction undershooting demographic demand for too long, thereby setting the scene for another affordability crisis.’   

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