Homeowners are set to take a second successive hit to their mortgage repayments this year, with all four of the big banks predicting a cash rate rise on Tuesday. Meanwhile, the barriers to entry for first-time buyers continue to get taller.
New research from Canstar has revealed the average annual income needed to afford a Sydney home if the rate is hiked as forecast, exposing the staggering salary buyers will soon need to make to enter the market, even with a five per cent deposit.
The salary needed to afford a Sydney home after another rate hike has been revealed
According to Canstar, Aussies currently need to earn a combined income around $300,000 a year to buy a median-priced house in Sydney with a five per cent deposit.
Following another rate rise, the lowest income required for a single buyer to purchase a home in Greater Sydney will be $132,000, a figure $42,000 higher than the median salary for full time workers according to the ABS.
Buyers would need the lowest annual income to buy in outer ring suburbs like Gilead, Bidwill and Tregear, while they require annual incomes in the $1-2m range to afford a home in the likes of Vaucluse and Bellevue Hill.
In Macarthur’s Gilead, a buyer would need a pre-tax income of $132,000 to support purchasing a property at the suburb’s median value of $746,000 with a five per cent deposit.
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5 Dallas Dr, Gilead, sold for $1.16m in February
Canstar data insights director Sally Tindall said the research confirmed a “brutal reality” for Aussie homebuyers.
“The great Australian dream of owning your own home has officially decoupled from the average Australian wage in many locations,” she said.
“When homeowners need to earn a combined income that’s nudging $300,000 a year just to buy a median-priced house in Sydney with a five per cent deposit, we’re looking at a fundamental structural issue rather than a rounding error.
“Add in a couple of kids and the equation gets even harder.”
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Vaucluse demands a salary of $1m
On an upcoming rate hike, Ms Tindall said a standard 0.25 per cent hike to the cash rate translates to a $12,000 drop in the maximum amount the average income earner on a full-time wage can borrow from the bank.
“Not a deal breaker for most, in isolation, however, a series of hikes could put the goalposts out of reach for already stretched buyers,” she said.
“To add insult to injury, despite the February hike and the threat of further rises, property prices are expected to keep on climbing due to a lack of stock, increasing the squeeze on first home buyers.”
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Silvia Girelli, Kurtis McMullam and their daughter Nina at their home in Coogee. Picture: Jeremy Piper
Sydney couple Silvia Girelli and Kurtis McMullam have felt the impact of February’s rate hike, as it came right at the time they were looking to upsize from their Randwick apartment, which is currently listed at a guide of $1.35m.
Looking for more room for their two young daughters to grow up in, they purchased a townhouse in Coogee for $2.1m.
Mr McMullam said interest rate movement had been “in the back of his mind” during the process of buying and selling.
“It’s something that we factored in, in terms of our costs per month,” he said.
“It’s already pretty high as it stands, our monthly costs for the mortgage, so I had it in the back of my mind: ‘can we manage with that?’”
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Their apartment on William St, Randwick is listed for $1.35m
Selling agent Nick Wiggan of Ray White Eastern Beaches said while the market in Sydney’s east could be made “more cautious” by another rate hike, property had a tendency to persist.
“When the stock market becomes a little bit more shaky, historically people have turned back to bricks and mortar,” he said.
“I think that may well happen again. I’ve seen more investors coming onto the marketplace this year than last.”
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