The Australian dream of owning a home has become a nightmare for many, with housing affordability hitting its lowest point in 30 years. The latest report from property analytics firm PropTrack reveals that households with average earnings would need to save 20% of their income for over five and a half years to accumulate the necessary deposit for a median-priced home. This contrasts starkly with the situation in 1985, when it took a little over two years to save the same amount.

Senior Economist Angus Moore from PropTrack explained, “Today, it’s significantly more challenging to save for a deposit than it was three to four decades ago when the house price to income ratios were much more manageable.”

The report also highlighted that mortgage repayments now consume around a third of an average household’s income compared to only a fifth in 1985. This significant increase in housing costs is primarily driven by rising interest rates and escalating house prices, which have surged in recent years.

“The last two years have seen a rapid shift from a period of relative affordability in 2020 and 2021, aided by low interest rates, to the current situation where interest rates have climbed at a pace not seen since the 1980s,” said Mr Moore.

The affordability crisis has hit low and middle-income earners hardest, with households earning $64,000 per year only able to afford three per cent of homes on the market. The geographical location also plays a crucial role in housing affordability. It’s toughest in New South Wales, Tasmania and Victoria where a typical-income household can afford just seven per cent of homes sold.

On the other hand, Western Australia offers the most affordable housing, with a typical income household able to afford 22 per cent of homes. “Five years ago, Western Australia was the least affordable state due to the mining boom. However, prices have grown slowly since then, making it a relatively affordable state,” Moore explained.

Our Northern Beaches Buyers Agent and Sydney Buyers Agent have also reported a significant increase in the number of clients seeking their services to navigate the challenging property landscape.

Despite the gloomy outlook, Moore believes there’s a silver lining. “We’re unlikely to see the kind of interest rate hikes we’ve experienced over the past 18 months, which means affordability may not deteriorate as rapidly,” he said. He also pointed out that growing incomes could help offset higher mortgage costs, though he acknowledged it would be a slow process.

Government initiatives like the First Home Loan Deposit Scheme can provide some relief for buyers, but according to Moore, the ultimate solution lies in increasing the supply of homes in desirable locations. As a Buyers Agent on the Lower North Shore and Northern Beaches, we can attest to the high demand for properties in this area.

“The current situation underscores the urgent need to build more homes where people want to live. It’s the only sustainable way to improve housing affordability in the long term,” Moore concluded.

With housing affordability at its worst level in three decades, it’s clear that more needs to be done to help Australians achieve their dream of homeownership. Whether you’re looking to buy in Sydney or seeking the help of a Northern Beaches Buyers Agent, it’s essential to stay informed and plan carefully.