The dream of owning a home is slipping further out of reach for single Australians, according to the latest analysis of mortgage repayments and average earnings by financial comparison site Mozo.com.au. 

“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,” said Rachel Wastell, Mozo’s personal finance expert.

Data released on the ‘Mean Dwelling Price’ from the Australian Bureau of Statistics (ABS) this week, reveals a stark picture of home affordability nationwide. 

Using the average variable rate on the Mozo database, the average earnings data from the ABS, and the new mean dwelling prices, Mozo has discovered that for single income earners, making those monthly repayments is an almost impossible task.

Before tax, across Australia, home loan repayments as a percentage of average income have surged to 65%. Even in the more affordable regions like the Northern Territory, singles still need to commit 36% of their monthly earnings to cover mortgage costs.

"With home loan repayments consuming such a significant portion of average monthly earnings, it's becoming almost impossible for singles to secure a property without substantial savings or additional financial support,” Wastell said. 

“In NSW, where the mean dwelling price is over $1.2 million, an average single earner would need to spend 82% of their income on their mortgage repayments.”

“This is clearly unsustainable and indicates that homeownership is increasingly the domain of dual-income households.”

Meeting repayments an almost impossible task for single buyers

After-tax, the situation becomes even bleaker for single income earners trying to get a foot on the property ladder. This is despite the calculations taking into account the Stage 3 tax cuts that will come into effect on 1 July 2024.

Mozo analysis shows that Australians buying a median price dwelling with a 20% deposit would still be coughing up 84% of their income just to cover mortgage repayments.

In New South Wales, where the mean dwelling price is $1.2 million, the average single earner is completely priced out, as monthly repayments consume a staggering 106% of their after-tax income. In Victoria, despite the lower mean dwelling price of $914,300, single earners still need to allocate 81% of their after-tax income towards their mortgage. 

The trend persists across all states, with single-income earners struggling to bridge the gap between earnings and the cost of homeownership. 

“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,” stresses Wastell.

“Many are now being forced to reassess their living arrangements, either by postponing their dreams of homeownership or considering alternatives.”

Home Loan Repayments as a % of Average Income (before tax)

Home Loan Repayments as a % of Average Income (after tax)

Is it time for single buyers to partner up?

Wastell advises that one of these possible alternatives for singles is to co-buy a home with family or friends to get a foot on the property ladder. However, she cautions that this approach requires careful planning and legal safeguards.

"One way singles could get around this dilemma is by partnering with family or friends to purchase a property and reduce the size of mortgage repayments. 

“By pooling resources, singles could increase their buying power and share the burden of high repayments, making it easier to enter the property market.”

“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."

Tips for Buying with Family or Friends

1. Formalise Agreements: Have everything in writing. Formalise the arrangement with a legal agreement that outlines everyone's contributions, ownership percentages, and what happens if one party wants to sell their share.
2. Get Legal Advice: Applying for a joint home loan can increase your borrowing capacity, but it's essential to seek legal and financial advice to understand the implications.

Have a Clear Exit Strategy: Establish a clear exit strategy in case someone wants to move on or sell their share of the property. This should be part of the initial agreement, under the guidance of a legal representative.