Over the past few months, the Sydney property market has cooled down a considerable amount, making it easier for homebuyers and investors to get onto or climb the property ladder.
New data on mortgage stress has shown how much an individual in Australia would need to be making in order to afford a house in each state and capital city.
Across New South Wales and in Sydney, you would need to be earning above the average weekly earning to comfortably afford a median priced house, so let’s look at exactly how much this is.
Currently, the median house price in the State of New South Wales sits at $665,000.
Based on a 30 year mortgage at the current Australian Standard Variable Rate of 5.05% and after deducting a 20% deposit, estimated weekly repayments would be about $718.
Data from the Australian Bureau of Statistics show that across the state, the median salary is $49,256 for an individual, working out to be $783.23 per week.
Hence, for the average person to afford an average home, they would need to be putting 91.67% of their weekly pay towards their home loan.
A homeowner is considered to be under mortgage stress if more than 30% of their income goes towards paying repayments.
Hence, to avoid mortgage stress, someone looking to buy a median priced house in New South Wales would have to have a taxable salary of $124,453.
This works out to be about $2,393.32 in weekly earnings so that you can comfortably afford mortgage repayments.
Affording a house in Sydney
If you’re hoping to afford an A-grade home or an investment grade property, especially in the inner suburbs of Sydney, you would obviously need to be earning significantly more.
A median priced house in Sydney would cost you $925,000, about a quarter of a million dollars more than the median price across the state of New South Wales.
With the more expensive property costs, the estimated weekly repayments for a median priced house in Sydney based on the previous calculations would be $999.
The median salary for Sydneysiders is $51,814, only $2,558 more than the state.
This works out to be $815.42 a week compared to $783.23, a difference of $32.19.
This means that the average person would have to be making $183.58 more than their current weekly earning in order to afford an average house, and that’s if 100% of their income was going to mortgage repayments.
To be able to sustainably afford a house in Sydney, an individual would have to be making $173,160 in taxable income per year, or $3,330 a week.
Buying your own house as an individual is proven to be difficult, however, not entirely impossible, even if you don’t make $3,330 a week.
What does this mean?
If you’re making less than what’s necessary to avoid mortgage stress, you’ll probably need a partner who also earns a good income.
Of course you could consider looking at less expensive properties, however, it’s important that you don’t sacrifice crucial qualities such as location and easy access to facilities and transport.
In the long run, the more checkboxes a property can tick off for prospective buyers, the better, even if that means having to earn more or save more initially.
Guest author: James Pointon is a Commercial Manager at OpenAgent.com.au, an online agent comparison website helping Australians to sell, buy and own property.