Housing affordability in Sydney dips lower than national average

Tuesday 28 April 2015

Article by Mozo

People looking to buy a house in Sydney are in for a tough time. Risk analysis and ratings agency Moody's reported on Monday that the amount of household income being spent to pay off a home loan for a house in Sydney is at an almost ten-year high.

Housing affordability in Sydney dips lower than national average
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On a national level however, low interest rates and flat household incomes have helped keep house prices affordable in general. Moody’s research accounts for the amount a household with two average incomes would need to pay towards a monthly mortgage on a median price house.

So while in other parts of Australia, people need to spare a little more than a quarter of their income (27%) towards their mortgage, in Sydney, households have to shell out on average, about 35.1% of their income for loan repayments as of 31 March 2015. Last year, this ratio was calculated to be about 32.8%.

A similar trend was observed for Melbourne as well, where the ratio of household income needed for repayment had increased from 27.5% in 2014 to 28.2% this year.  

The drop in affordability for both Sydney and Melbourne, according to the report, was a result of higher prices for houses rather than units.

This trend is only expected to worsen. "Furthermore, stress testing in four scenarios also shows that Sydney's market is most at risk of a further deterioration in housing affordability," says Natsumi Matsuda, a Moody's Analyst.

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