Warning: millionaires only.
New research has revealed there are now 19 suburbs across Australia where you need to earn at least $1 million a year just to have a shot at owning a home.
Thanks to skyrocketing property prices and relentless interest rate hikes, the dream of home ownership in these exclusive areas is slipping further out of reach for even many higher income earners.
An additional 171 suburbs now require potential buyers to rake in over half a million dollars annually to afford a median-priced house, according to the Finder.com.au analysis of PropTrack data.
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These shocking figures assumed a 20 per cent deposit and a standard loan rate, with repayments not exceeding 30 per cent of the buyer’s yearly income.
Only about 15,000 people in the entire country report earnings over $1 million a year. ATO figures indicated.
Many of the millionaire suburbs are spread around the Sydney Harbour.
Experts said the phenomenal earnings needed to crack into the market in some areas were deepening social divides, with the gap between the richest and poorest suburbs growing wider than before.
“There is a huge portion of the buying market that doesn’t even need a mortgage to buy their houses,” said PropTrack economist Paul Ryan.
“They have a lot wealth that is not affected by interest rate rises and they would have benefited from the stronger economy we have had in recent years.”
Most of the suburbs where annual earnings of over a million were needed to crack the market were spread around Sydney’s Harbour and beaches.
Melbourne’s Toorak and Canberra suburb Forrest were the only entries outside NSW.
The Sydney millionaire suburbs included Bronte, North Bondi, Cremorne Point, Northbridge, Curl Curl and Mosman, among others.
Toorak is Melbourne’s most expensive suburb.
Someone wanting to buy the average house in Sydney’s most expensive suburb Bellevue Hill needed an annual income of about $1.9 million to afford the repayments.
The Finder data showed there were a further 171 suburbs where hopeful home buyers needed to earn more than $500,000 annually to afford a house priced at the suburb median.
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For some context, these earnings are close to what many surgeons – Australia’s highest paid professionals – pocket in average income, according to wage statistics.
Among the suburbs where buying a house required minimum income of $500,000 or more, eight were in southeast Queensland, 18 were in Melbourne and four were in Perth.
Adelaide had three, the ACT had one and the rest were all in Sydney.
Auction markets have been heating up despite affordability pressures. Picture by Max Mason-Hubers
Finder head of research Graham Cooke said the income required to buy a home in many areas was now “extreme”.
“Property prices and the cost of debt are significantly outpacing wage growth, and as such, affordability has slipped even further out of reach compared to 2020,” he said.
The Finder.com.au analysis of PropTrack data revealed the minimum income new buyers needed to be able to afford the repayments on homes priced at the median in each capital and suburb.
This was if they paid the typical loan rate charged by lenders and used a 20 per cent deposit.
It also assumed the buyer wanted to avoid mortgage stress – a situation where households spend more than a third of their gross income on repayments.
The analysis revealed home buyers will need to earn twice as much as they did at the start of the Covid pandemic to be able to afford the average home in most Aussie cities.
Governor of the Reserve Bank of Australia Michele Bullock is expected to keep rates on hold at the central bank’s next board meeting. Picture: NCA NewsWire / Martin Ollman
The radical change in income needed to afford repayments has followed explosive growth in home prices and record interest rate hikes, which have strangled most Aussies’ buying power.
Sydney buyers required the biggest rise in incomes to keep up with the market changes, with the annual salary needed to afford a median priced house jumping by about $148,000.
An annual income of $130,000 would have been enough to secure a median priced Sydney house in 2020 ($970,000) due to banks charging an average loan rate of 2.92 per cent.
With the Sydney median now at $1.4m and the average lender rate for owner occupiers swelling to 6.27 per cent, new buyers need an annual household income of $278,000 to afford the repayments.
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Buying a median priced house in Adelaide now required an annual income of about $148,000, up 131 per cent from the $64,000 needed in 2020.
Purchasing at the Brisbane median required $166,000 in annual earnings, up 128 per cent from the $73,000 needed four years ago.
Many of the suburbs where $500,000 is needed to afford a home have modest houses.
It’s worth noting that the changes in income requirements for apartment buyers have not been as extreme, with the increases ranging from about 50-75 per cent.
Even in Melbourne, the extra income needed to afford repayments was significant, despite more measured changes than in other capitals.
An annual income of just under $100,000 was enough to afford an average Melbourne house purchase back in 2020. Buyers today need about $172,000 – roughly $73,000, or 74 per cent, more.
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