Australian housing market shuts out singles – what to do if you’re riding solo
They say teamwork makes the dream work. But it's now clearer than ever that the platitude applies to the Australian dream of homeownership, too.
New Mozo research shows that singles are likely struggling to buy property solo, as median dwelling values surged more than $209 billion over the March quarter of 2024.
House prices, coupled with a high interest rate environment (and a brief fling with low wage growth), now means it takes a record-high income to service a home loan, according to Mozo personal finance expert, Rachel Wastell.
“With skyrocketing home prices and rising interest rates, the proportion of income needed to service a mortgage is at a record high, making it increasingly unlikely that singles can afford to buy a home on their own,” Wastell said.
“...homeownership is increasingly the domain of dual-income households.”
Across the country, mortgage repayments as a percentage of average pre-tax incomes have grown to 65%. But for the more expensive states, the situation is far worse.
In fact, Mozo found that in NSW, where the average dwelling price is $1.2 million, an average single income earner would need to spend 82% of their post-tax income just to service their home loan repayments.
In Victoria, despite a lower median dwelling value of $914,300, singles still need to fork out 81% of their post-tax income on mortgage repayments.
“This is clearly unsustainable and indicates that homeownership is increasingly the domain of dual-income households,” said Wastell.
So, what can you do if you’re single and an average income earner? Wastell says single Aussies need to get creative.
“It's becoming increasingly clear that without substantial financial support or creative co-buying solutions, the dream of homeownership for singles is slipping further out of reach,” she said.
A possible solution is for singles to partner up with family or friends under a property co-ownership arrangement. According to Wastell, partnering up could help to reduce the size of mortgage repayments and increase your borrowing power.
Of course, it would require careful planning and legal safeguards, in case one of the parties decides they want to sell.
“Collaborating with family or friends to buy a property can be a smart move, but it's vital to approach it with clear agreements and have everything in writing.
“Formalise the arrangement to outline everyone's contributions, ownership percentages, and what happens if one party wants to sell their share."
Top 3 tips for buying a house with family or friends
- Formalise the agreement. It’s important to have everything you agree upon in writing, with a legal agreement that outlines everyone’s contributions, ownership percentages, and what happens if one person decides to sell their share.
- Get legal advice. While applying for a joint home loan can increase your borrowing power, there are legal implications you’ll need to consider beforehand. So, make sure you seek both legal and financial advice before getting started.
- Have a clear exit strategy. Having someone desire to sell their share of the property can cause a lot of confusion. Take the confusion out of it by coming to an agreed-upon exit strategy in case someone wants to move on. This should be a part of the initial agreement, and can be devised by your lawyers.
When it comes time to purchase a property, having a home loan with a competitive interest rate in your corner can help you save money. Make sure to do your due diligence and compare home loans, keeping in mind the home loan features you might like, e.g. offset accounts.