Now and then: the cost of buying a home in 1986 vs today

Thursday 07 September 2017

Article by Kelly Emmerton

It’s not news that house prices are skyrocketing in some of Australia’s capital cities, and recent Mozo research into the Bank of Mum and Dad has revealed just how hard it is for young home buyers to get a foot on the property ladder these days - especially when compared to thirty years ago.

Now and then: the cost of buying a home in 1986 vs today

Mozo’s findings revealed that Aussie parents have lent out a combined $65.3 billion to help their children purchase their first home. And it’s no wonder young buyers are turning to their family for financial help, when the national average house price now clocks in at over half a million dollars.

“With Australian property prices rising by 618% over the past 30 years and national incomes failing to keep up, the Bank of Mum and Dad is proof of family generosity but also points to a broken property market for younger generations,” said Mozo Director Kirsty Lamont.

RELATED: Aussie parents cough up $65.3 billion to get young buyers into the property market

Parents who might have bought their own home thirty years ago - and are now shelling out to help their kids do the same - might have picked up a property with the median price tag of $76,278. In 2016, the national average house price was $547,714.

In contrast to skyrocketing property prices, wage growth has been much slower over the last thirty years. In 1986, the average annual income was $17,321, compared to $78,832 in 2016.

That means that in 1986, the average property price was 4.4 times the average income - in 2016, it’s 6.9 times as much.

RELATED: Money tops list as biggest regret for every Australian generation

But the price tag at the auction block isn’t the only cost to consider when buying a house. The cost of stamp duty has also risen since 1986, when the average property would attract a charge of $1,224.

According to Mozo’s stamp duty calculator, in 2016 the average house came with a $20,414* stamp duty price tag in NSW.

So in 1986, to come up with a 20% deposit and cover stamp duty on the average property, a homebuyer would have had to save up $16,933. In 2016, to do the same thing, a homebuyer now has to save $129,956. That’s around 7.6 times as much - in comparison, wages are only around 4.5 times as high as in 1986.

As a percentage of income, that means a 1986 buyer would have to save up 98% of their yearly income. A buyer in 2016, on the other hand, would have to save 165% of their annual income - or a little less than two years worth of pay-checks.

Buying a home - 1986 vs 2016

Today, the average standard variable home loan rate is just 4.88%. So if you’re in the market for a new home, keep it as affordable as possible by finding the best rate around. To do that, head over to our home loan comparison table.One thing today’s homebuyers have going for them is that there are plenty of low rate home loans on the market. In September 1986, the average standard variable home loan rate was a whopping 15.50%, whereas in September 2016, it was a much more reasonable 4.95%.

*Includes Mortgage Registration and Transfer fee
Please note: numbers have been rounded.

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