Cost of living: Melbourne families now need $75,000 a year to cover mortgage, bills | Canstar

22 hours ago 3

Shock amount needed to afford to live in Melbourne for a year artwork 2 - for herald sun real estate

Melbourne families are finding little left over after paying their mortgage, grocery, utility and other bills.

Melbourne families are delaying kids or plans to upsize their home as growing bills and essential costs piled on top of mortgages now mean it costs $75,000 a year to live here.

Canstar analysis covering everything from typical water bills, petrol costs and groceries for a couple and two kids, as well as a mortgage for a $930,000 typical house, shows the city is now the third most-expensive capital for families to own a home and live in nationwide.

In total, they calculated the annual cost of owning a house in Melbourne at $75,156, just behind Brisbane’s $79,460, though well below the $105,282, typical cost in Sydney.

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Forecasts that both Victorian rents and home prices will rise in 2025 could make things even worse for breadwinners, with the figure already chewing through almost the entirety of the capital’s average annual wage.

The Canstar analysis does not include council rates or health insurance, meaning that in most parts of the city the cost of owning a home wipes out every cent of the city’s $79,000 average wage, according to January figures from compensation management platform PayScale.

This does not include that a sizeable chunk of that wage would be lost to income tax.

And things aren’t much better for tenants, with the figures showing they need to spend an average of $55,191 a year to make ends to meet.

For a typical worker, that leaves just $24,000 a year for non-essential costs and saving to break out of the rental trap.

364 Childs Rd, Mill Park - for herald sun real estate

This Mill Park home recently sold for $930,000 and would likely come with a $50,000 annual mortgage payment.

The Canstar analysis indicates that even if a family manages to pay off their mortgage, living in Melbourne will still cost them upwards of $25,000 a year.

The firm’s research director Sally Tindall said that thanks to lower insurance, coffee and grocery costs, it had one of the lowest cost bases of all the capitals, with only Adelaide and Hobart cheaper at about $24,000 and $23,000 respectively.

“In the case of Melbourne, fewer extreme weather events compared to other locations in Australia has helped keep average home insurance costs lower than in some other regions, while Victoria’s investment into renewable energy sources is helping keep a lid on electricity costs, according to the Victorian Government,” she said.

But she noted that even with the prospect of interest rates declining this year, Melburnians couldn’t afford to be complacent about the cost of keeping their home in order.

“Even in a rate cutting cycle now, and while inflation might be coming down, it doesn’t mean the cost of most goods and services are now getting cheaper – it just means they’re not rising by as much,” Ms Tindall said.

“If you’re one financial hiccup away from breaking your budget, take action now before the dam wall breaks.”

12 Glen Cairn Ave, Ringwood - for herald sun real estate

A two-bedroom Ringwood home that would also come with a typical $50,000-a-year mortgage repayment also notched a sale in 2025.

She advised speaking with your bank or broker to negotiate your home loan rate as the first step.

Loan Market broker Jacob Decru said he was seeing signs families were struggling more with the cost-of-living crisis than first-home buyers.

“The ones that are coming to us who want a bigger home, who now have two kids and their house is too small, they go through all the items in their cost of living and they are having to adjust that a lot more than we were a couple of years ago,” Mr Decru said.

“We need to have that meeting six months before they buy, so they can test out the repayments on a bigger mortgage and if they can afford to live like that.”

In a growing number of instances, these buyers were finding they couldn’t actually cut back on other costs to make their next move count and “getting stuck and can’t upsize”.

However, the southeast Melbourne-based broker noted that renters with kids were now in an even more dire situation.

10 Lunar Drive, Greenvale - for herald sun real estate

What an about $50,000 a year mortgage payment would cover in Greenvale.

“If they don’t already have a deposit, or the bank of mum and dad, it’s becoming more unattainable — or people have to go rural to find that affordable price point,” he said.

Mr Decru added that while last year homebuyers had been very conscious of what they would pay, in February his firm had recorded a 30 per cent increase in home loan pre-approvals across Melbourne compared to 12 months earlier.

“The other big dilemma is will the rate cuts be enough to keep up with the rising prices, and I don’t think they will cut as quickly as people think,” he said.

“And there’s not as much supply of homes coming up, so with more people looking that will increase values.”

Housing developers are also seeing signs growing families are giving up on suburbia and heading to the city’s fringes as they try to upsize amid a cost-of-living crisis.

Moremac national sales director Lachlan Moore said that in Melbourne’s south east, about 36 per cent of their buyers were now families buying a second home — up 10 per cent from a year ago and 15 per cent from 2023.

More than half are swapping a unit or small house in areas like Springvale or Clayton for a bigger residence in the firm’s Cranbourne East or Berwick new housing estates.

20 Janice St, Macleod - for herald sun real estate

Along with petrol, groceries, utilities and a few other costs, the mortgage on this three-bedroom Macleod home sold recently for $928,000 would chew through most of the city’s typical $79,000-a-year wage.

“They are moving 15-20km out for their second home,” Mr Moore said.

“And while pre-pandemic we would almost solely be dealing with blue collar trades and labourers … now there’s work from home options for most people and it’s given them a little more flexibility.

“So we are seeing white collar workers and health professionals from doctors to dentists and a lot of nurses and paramedics.”

Alanie and Jake Carroll built the biggest home they could in Donnybrook, hoping the property in Moremac’s Kinbrook estate would future-proof them against needing to upgrade as their family grew.

But with the cost of living on the rise, they’re expecting they will have to delay a sibling for their 1.5-year-old first child, Billy, even though they have room for more.

“That timing will depend on finances, so when we would think about trying for another will be dependent on getting a bit more of the house paid off and getting into a more comfortable position,” Ms Carroll said.

“I would say we are coping, but there’s not much room for savings or to go on a holiday or if we need to upgrade something in the house.”