Australian Dream Drives House Prices Up
The RBA concedes interest rates and market choices are resulting in suburban sprawl.
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The concept of the Australian dream, to live in a house, is driving people further from city centres according to the Reserve Bank of Australia.
In a housing affordability inquiry, the central bank told a parliamentary committee looking at supply and pricing that “as populations increase and cities expand, some households will need to live further away from the centre of major cities and/or accept further increases in higher-density housing.”
It comes as last week the RBA told the inquiry that low interest rates are the primary driver of Australia’s property boom over dwelling supply issues.
Further, the RBA noted that buyers preferring houses over apartments and over the course of the pandemic regions over cities increases the difficulty of policy-making.
“The experience of lockdowns may also have made apartment living less attractive for some households, said the RBA.
“Some elements of the response to the pandemic could affect preferences between these choices, though it’s unclear how lasting these responses will be.
While the post-covid property market response is still unclear, the great Australian dream of a home in the suburbs remains the goal for many.
“Australia’s dwelling stock remains dominated by large, detached housing, and around one million detached houses have been completed over the past decade,” the RBA says.
The RBA has also noted the importance of rental affordability, noting that over the last 30 years the amount of households that are leasing has increased from one-quarter to at least one third. Home ownership rates have fallen across most age groups, with the most significant drop found in the 25-49 demographic.
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New research suggests spending 40 percent of household income on loan repayments is the new normal
3 min
Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.
Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.
“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.
CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.
Sydney
Sydney’s median house price is $1,414,229 and the median unit price is $839,344.
Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.
Melbourne
Melbourne’s median house price is $935,049 and the median apartment price is $612,906.
Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.
Brisbane
Brisbane’s median house price is $909,988 and the median unit price is $587,793.
Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.
Adelaide
Adelaide’s median house price is $785,971 and the median apartment price is $504,799.
Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.
Perth
Perth’s median house price is $735,276 and the median unit price is $495,360.
Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.
Hobart
Hobart’s median house price is $692,951 and the median apartment price is $522,258.
Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.
Darwin
Darwin’s median house price is $573,498 and the median unit price is $367,716.
Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.
Canberra
Canberra’s median house price is $964,136 and the median apartment price is $585,057.
Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
