Sydney property more affordable than 26 years ago, says study
While the debate over Sydney’s soaring property prices continues, new research shows that the housing market is more affordable than it was 26 years ago.
- From woe to go: the process of buying your first home
According to the latest data from BIS Shrapnel, homebuyers in 1989 had to use almost half of their income to pay off their mortgage as opposed 35.9% now.
One of the reasons for this is also that even with higher prices, because of the record low interest rates, a smaller proportion of the homeowners’ incomes goes towards mortgage.
"The interest rate was 17% at that time. It spiked so high, the whole country went into recession," BIS Shrapnel's senior manager of residential, Angie Zigomanis, said.
But experts also warn that a rise in interest rates can lead to a sudden change in the affordability trend.
The best time to be paying off a mortgage was 1997, when just 24% of a homebuyer's income was needed to pay off a home loan, but then came the boom, reported Domain.com.au.
"In the early 2000s, Sydney went through a massive boom, arguably a stronger boom than now," Mr Zigomanis said.
Just last week, RBA Governor Gelnn Stevens said that Sydney’s rising property prices were “acutely concerning.”
Currently, the biggest challenge for first-home buyers is not actually repayments, but higher asking prices requiring hefty deposits.