June 18th 2024.
Housing affordability has become a major issue in Australia, particularly for single individuals earning the average wage. A recent analysis conducted by the financial comparison site Mozo has revealed some concerning statistics. In New South Wales, a person earning the average wage would need to dedicate a whopping 82% of their monthly earnings just to cover the average mortgage in the state. This is well above the recommended 30% threshold for housing stress. And that's before taking taxes into account - once those are factored in, the same mortgage payments would require a staggering 106% of the average income. It's clear that this situation has made it nearly impossible for single individuals or households with just one income to enter the property market in Australia's most populous state.
Rachel Wastell, a personal finance expert at Mozo, expressed her concern over the situation, stating that without significant financial aid or alternative solutions, the dream of homeownership for singles is becoming increasingly out of reach. Many are left with no choice but to delay their plans of owning a home or explore alternative living arrangements. And the situation isn't much better in other parts of the country. The national average dwelling price of $959,300 requires monthly mortgage payments of around $5300, which amounts to 84% of post-tax earnings. Victoria is not far behind New South Wales in terms of unaffordability, with 81% of post-tax income needed to cover the average home loan. The Australian Capital Territory, Queensland, South Australia, Tasmania, and Western Australia also face similar challenges. The only exception is the Northern Territory, where the measure falls below 50%.
According to Wastell, the skyrocketing property prices and rising interest rates have led to a record high proportion of income needed to service a mortgage. This makes it increasingly unlikely for single individuals to afford a home on their own. This was not always the case - in the early 1980s, the price-to-income ratio was around 3.3, which means the median home price was 3.3 times the average disposable income. However, by 2015, this ratio had more than doubled to 7. And despite a slight dip in mid-2017, it has been steadily increasing, reaching a decade-low in early 2021 before surging once again due to rising property prices and interest rates.
Wastell also noted that this trend has made it nearly impossible for average-income earners to enter the housing market without significant savings or additional financial support. In New South Wales, where the average dwelling price is over $1.2 million, a single individual would need to spend 82% of their income just to cover their mortgage payments. This is clearly unsustainable and indicates that homeownership is now primarily reserved for dual-income households.
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