Affordability at all-time low in Sydney, do first home buyers still have a shot?

The Sydney Harbour Bridge.

Australia’s most expensive property market has now surpassed its 2017 peak, with the median house price in Sydney reaching $1.06 million, according to property research firm CoreLogic.

The figures confirm the coronavirus pandemic hasn’t been the sledgehammer to property prices many thought it would be. Dropping just 3 per cent last year, Sydney values hit a floor in October before recovering 5.7 per cent.

But CoreLogic’s executive research director, Tim Lawless said the jump in prices raises concerns for young Australians, whose chances at home ownership seem to be shrinking by the day.

“The fresh record high is great news for Sydney home owners, but highlights the challenges for non-home owners looking to participate in the housing market as values rise faster than incomes,” he said.

The Reserve Bank of Australia, which cut official interest rates three times last year, has indicated it won’t be raising any alarms about surging prices so long as lending standards are maintained.

At a parliamentary hearing last month, RBA Governor Philip Lowe said “there are few signs of a deterioration in these standards.”

In contrast, the Reserve Bank of New Zealand recently agreed to target housing sustainability when setting its own interest rates, hoping to preserve opportunities for first home buyers and low-income borrowers at risk of being priced out.

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With the RBA making clear it intends to keep the cheap money flowing well into the Covid recovery, property prices are expected to continue their meteoric rise.

Earlier this month, CoreLogic reported that Australian housing values jumped by 2.1 per cent over February, marking the biggest monthly increase in 17 years.

It also found properties on the higher end of the market were benefiting most from this upswing. Last month, the top 25 per cent of capital city homes (priced $960,000 or above) recorded a 2.7 per cent increase in value.

So far, first home buyers have been well-represented in the numbers for new loan commitments. But it might only be a matter of time before they’re crowded out by cashed-up investors who are ready to jump back into the market.

Since investors are able to leverage their existing properties to outbid first home buyers, there’s a good chance more young Australians will be relying on their parents for a chance to get a foot on the property ladder.

Mozo’s property expert Steve Jovcevski, also suggests looking beyond the major markets when searching for property. While prices in smaller markets have also been rising at a quick pace, they’re still a far cry from Sydney and Melbourne levels. 

For more information on property and lending trends, head over to our home loan statistics page. And if you’re in the market for a home loan, visit our home loan comparison page, or browse the selection below.

Home loan comparisons on Mozo - last updated 13 August 2022

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  • Variable Home Loan 70

    interest rate
    comparison rate
    Initial monthly repayment
    3.10% p.a. variable
    3.12% p.a.

    Affordable home loan rate for buyers or refinancers.. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 30% deposit required.

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  • Unloan Variable

    Owner Occupier, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    3.14% p.a. variable
    3.06% p.a.

    For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.

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  • PAYG Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    3.29% p.a. variable
    3.33% p.a.

    Low variable rate. Ideal for new home buyers or refinancers. Unlimited additional repayments. Unlimited free redraw. Application completely online. Optional 100% offset can be added for $120 p.a.. 20% deposit required.

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  • Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    3.79% p.a. variable
    3.79% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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