Housing affordability crisis reaches new levels in Sydney

Australia’s housing affordability issues worsened over the June quarter thanks to record high house prices and Sydney was hit hardest of all, according to the Housing Industry Association.

The HIA Affordability Index, which takes into account factors such as wages, house prices and borrowing costs to determine how accessible  Australia’s housing market is, showed a 0.3% decline in overall affordability over the quarter.

NSW was “the most significant negative influence” on the national level of affordability, declining by 2.2%, while the booming Sydney market in particular saw affordability decline by 0.7%.

HIA Principal Economist, Tim Reardon said that, “acquiring and servicing a mortgage on a house in Sydney now requires more than two standard Sydney incomes.”

Significantly, Sydney is the only market to reach this level of unaffordability in the 15 year history of the Affordability Index report.

According to the HIA, much of the problem was that growth in house prices far outstripped the growth in wages, with the national median hitting a record high of $540,200 over the quarter.

And in Sydney things are even more dire. Domain recently reported that there is only one suburb left in the harbourside city with a median price below $500,000, while as of June 2017,  the median price for the Greater Sydney Area was sitting at  $1,178,417.

Mozo’s home loan repayments calculator shows that even with a low home loan rate of 3.74%, buying a home with that price tag could mean making monthly repayments in excess of $6,000 over a 25 year term. Added to that is the upfront cost of stamp duty and mortgage registration fees, which could be upwards of $50,000.

A silver lining may be that first home buyers in NSW may qualify for an stamp duty exemption - if they manage to find a property for less than $650,000.

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It’s a sad state of affairs which could easily see first home buyers locked out of the market, said Mozo property expert, Steve Jovcevski.

“At that price point, a 20% deposit is more than $230,000. Add on stamp duty, and that’s a massive hurdle to clear just to get your foot in the door,” he said.

“And that’s without even thinking about meeting the ongoing repayments.”

On the lighter side of things, the HIA’s report showed that things had improved in six of Australia’s eight capital cities, excluding Sydney and Perth. Darwin led the pack, with a 4.3% improvement in affordability.

If your home loan repayments are hitting you where it hurts, it might be time to consider refinancing to a better deal. Check out our home loan comparison table to find an offer that suits your budget.