How much income is required to service a mortgage? It depends on where you live
New research suggests spending 40 percent of household income on loan repayments is the new normal
New research suggests spending 40 percent of household income on loan repayments is the new normal
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.
Amrish Maharaj undid a century of hodgepodge alterations while navigating strict conservation rules
Haberfield, a charming slice of suburbia in what locals call Sydney’s “inner west” region, is miles from the landmarks like the Harbour Bridge and the Opera House, and isn’t famous for multimillion-dollar waterfront mansions. What it is known for, however, is fiercely protecting its architectural identity.
After an uproar in the 1970s led by local residents—who were fed up with period homes getting unsympathetic makeovers—the National Trust created the Haberfield heritage conservation area in the mid-1980s. As a result, the suburb of approximately 6,500 people has one of Sydney’s best-kept streetscapes.The heritage designation has been a win for preserving the past, but has created challenges for architects tasked with making Haberfield’s homes more family-friendly, sustainable and sellable.
Architect Amrish Maharaj was hired by his clients, owners Ramy and Sarah Azzam of ML Constructions, to modernise a single-storey Federation dwelling—an era of Australian architecture between approximately 1890 and 1915. Although its bones dated back to the turn of the last century, the Haberfield home, coined Glencoe, had already undergone a number of objectionable changes before conservation rules had come in. The design was stuck between two time periods.
“Its original roof and chimneys had been removed and replaced with a post-1943 hipped roof clad in terracotta tiles. The length of the house had been doubled with the addition of a substantial rear extension. A small skillion roof was put over the front veranda, metal balustrading and the front verandah detailing had also been amended, removing the original timber work,” Maharaj said.
“The previous work appeared to have focused on increasing the number of rooms, and not improving the spaces within,” he added. From the entry, a dark central hallway cut the house in half, splitting four bedrooms and a bathroom to the north from an additional bedroom, an enclosed lounge room, dining room and kitchen to the south.
Despite the patchwork of renovations and extensions over the years, planning regulations still remained strict for the team attempting to bring the residence into the 21st century.
“We had an initial concept, which was a little more modern than the end result, but the local council wanted a more traditional construction. We had a heritage expert come and look at the house and give their recommendations,” he said. “She determined that it was probably part of a group of three or four houses that were once the same beautifully detailed Federation-era homes. But somebody had come along in the 1940s and did their own thing.”
“There was a discussion about pulling off the roof and getting it back to what it was, but it came down to a question of budget. We tried to put back as much as we could, by replacing the front windows with traditional timber, we changed the front path and front fence just to give a little nod to what used to be, without stripping the render and reconstructing the whole roof.”
Now the street appeal of the home is a better fit with its Federation neighbours. The decision was then made to pull focus from the facade while investing attention, and funds, into the rear of the house.
“In keeping with what the Council was wanting, we used traditional materials and techniques in the construction of the back extension even though it does feel very modern,” Maharaj said.
As well as employing conventional methods for the external build of the large rear addition, a host of modern-day luxury finishes were used inside, where the interior design was overseen by owner Sarah Azzam.
High-traffic floors were finished with limestone tiles, Polytec joinery was used throughout, and internal walls feature a sleek white set render. Bathrooms feature Fibonacci Terrazzo tiles with underfloor heating.
A standout of the new look is the grand triangular gable crowning the rear indoor-to-outdoor living zone, a unique design feature in the neighbourhood of smaller sized blocks and heritage homes. The seamless flow to the backyard is an element that has become a must-have in modern Sydney homes thanks to the temperate climate.
“Our work began with the deconstructing and restructuring of the original home. Retaining four good-sized bedrooms to the front of the house, the central areas were dedicated to service spaces, with a big family bathroom, laundry, powder room and en-suite. The home then steps down to a large open-plan kitchen, dining and living room, which seamlessly connects to an al fresco dining area, garden, and a new pool and cabana,” Maharaj added.
“It’s such a Sydney thing, the seamless flow to the outdoors from the main living area. When I think about our briefs, from every single client, I’d say right at the top of everyone’s list is natural light, good ventilation and a connection to the garden,” he said. “Australians also love a north orientation.”
The Azzams, who declined to comment on the project, bought the unrenovated Haberfield house in 2020 for A$2.5 million (US$1.6 million), then sold the reimagined residence in 2023 for A$4.9 million.
“They bought it as their forever home. That large space at the back was created that way because they’ve got a big extended family,” Maharaj said. “They were often talking about Christmas dinners of 20 to 30 people, and space for a grand dining table was specifically on their list of requirements. Sarah has a great design eye and was meticulously hand selecting the finishes. But they ended up seeing another house nearby and decided to do it all again.”
Maharaj shared some more thoughts about the design and build process.
The biggest surprise was… I think we got lucky with the glass gable in the back of the house. We tried to do something similar on a house only a couple of streets away about a year later and it was completely knocked back by Council. When we pushed back to ask why, we were told it should never have been approved as is. Sometimes the approval process includes a bit of luck.
A favourite material we discovered during the process was… Of all the materials, I’d have to say that the Super White Dolomite and the limestone flooring we used were the big hits. We had quite a few potential buyers asking about these items in particular. We have received a number of calls from other homeowners in the area who are looking for a similar renovation, and even the odd call from people who have seen the home and wanted to express how much they loved it.
The most dramatic change was… When we start these jobs, we can often see that the houses have been either abandoned or people have just added and removed rooms and walls over time. So bringing that all back together was really fulfilling for me as an architect. Originally, this house felt like a cold hospital ward when you walked through it, with all these rooms coming off one corridor. Bringing it back to life and making it feel like a home with a heart is something we’re really proud of.
The total cost of the renovation… Being able to do the building himself, and their own interior design meant the pair could save some money, but they really spared no expense. It was a project that cost approximately A$1.5 million.
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.