What you need to earn to afford a mortgage in Sydney’s red-hot property market

Kate Creedon 9 News| 12 April 2021

https://www.9news.com.au/national/ideal-salary-to-afford-mortgage-on-average-sydney-house-avoid-financial-stress/74af8886-aa2a-45f5-94ef-99307bd10c12

Home buyers now need to be making a six figure salary to afford the mortgage on an average house or apartment in Sydney’s red-hot property market, exclusive data has revealed.

Data compiled for Nine News by RateCity shows with a 20 per cent deposit, a household needs to earn at least $147,629 a year to buy a median priced house.

The latest Corelogic figures show the median Sydney house price is sitting at $1,112,671.

To have a buffer for potential interest rate or circumstance changes, a Sydney household needs to ideally earn at least $177,155 to avoid winding up in mortgage stress.To buy an apartment in Sydney with the current median of $755,360, you still need an income in excess of $100,221 – or $120,265 to have a buffer.According to the ABS, the typical full time adult annual salary in NSW is $91,099.

Broadcast journalist Michelle Stephenson says she’s given up trying to buy in Sydney.

“I’ve heard people refer to it as the great Australian nightmare and I think that’s probably the way we see it at the moment,” Ms Stephenson told 9News.”It’s just not possible or feasible for us to buy, we like to live in a certain area, we like our son to go to certain schools, and I think from that perspective, we’re just always going to be renters.”

Whether you’re looking to buy in Sydney, Melbourne or Canberra, you’ll need a six-figure income.It’s a much cheaper prospect in Brisbane, Hobart, Perth and Adelaide and cheapest in Darwin.Mortgage stress is classified as anything above spending 30 per cent of your pre-tax income on household repayments.Based on those calculations, Digital Finance Analytics data this week found 41.1 per cent of households across the country are in financial flow stress despite the lower interest rate environment.In NSW, 44.19 per cent of households were in financial stress and 37.66 per cent of households reported being in mortgage stress.”There was a time when you’d be considered wealthy if you earned $100,000, but in Sydney’s real estate market you can’t even afford an apartment without going into mortgage stress,” RateCity research director Sally Tindall told 9News.”Families in Sydney need to be earning a six-figure pay packet just to get their hands on the average priced apartment. And if they want a house with a backyard with a patch of grass then forget it unless they’re earning north of around $150,000.

According to ANZ, property prices are set to soar by up to 17 per cent in 2021 across the capital cities – and 19 per cent in Sydney – while wages are expected to rise by a paltry 1.25 per cent.”The equation just doesn’t stack up for many first home buyers. They’re going to find themselves locked out yet again,” Ms Tindall said.For those looking to buy into the market, experts recommend starting small with an affordable apartment or investment property.Buyers are also warned to factor in a one or two per cent rise in interest rates when budgeting and to avoid buying property out of their price range even if that means compromising on location.

“Do not trust your bank to tell you how much you can borrow, do the maths yourself, make sure you are comfortable with the monthly repayments,” Ms Tindall said.