Remember hearing that famous political gaffe “just get a good job that pays good money” – then you’ll be able to buy a home? An uninspiring, base-level thing for any politician to say, however, while it could have been delivered far more eloquently, there was some validity to his statement – especially in today’s soaring market.
New research conducted by CoreLogic comparing national dwelling values and average incomes demonstrated that low-income workers are only able to afford 17.6 per cent of available housing stock in Australia – or just 2.9 per cent in Sydney and 4.2 per cent in Melbourne.
Not only are low-income earners restricted to where they can live but are also being left behind when it comes to accumulating wealth through home ownership. Given property is the number 1 way people accumulate wealth, this is presenting quite the problem, especially when it comes to retiring.
Canstar recently conducted a study to calculate how much an Australian need to afford a modest home in each capital city. It found that buying and maintaining a home would cause mortgage stress for buyers on average salaries.
Here’s the disturbing results in table form.
Canstar data on weekly incomes required to avoid mortgage stress. Picture: Canstar
On the flip side, CoreLogic’s study showed top earners can afford a whopping 85.1 per cent of Australian homes including 93 per cent of all units and 82 per cent of houses.
An industry perspective
A good chunk of industries aren’t paying enough to support buying in the booming market. Let’s take a look at the numbers for medium income earners, who are in a position to buy 57.1% of homes. Of course, it’s important to note, all of these figures are an average numbers for weekly salaries. You’ll see that people in majority of these industries cannot afford a home without experiencing mortgage stress.
Electricity, gas waste services $1944
Accommodation & food $1161
Transport & warehousing $1685
Media & telecommunications $2033
Financial & insurance $2032
Professional, scientific & technical $2001
Admin and support $1526
Public administrative $1824
Health care $1675
Arts & recreation $1464
*ABS Average Weekly Earnings statistics, February 2021
Our winners are losing
Sadly, our essential workers have the most meagre property pickings. Seems completely unfair, given the service they provide to our communities. We never realised how important they were until COVID-19 broke loose.
Let’s examine the salaries of just a handful of those essential workers that supported us during the pandemic.
According to recent Australian salary data compiled by job site indeed.com, the average weekly base salary of primary school teachers is $1611, paramedics at $1434, registered nurses ($1411), entry level police officers ($1212), wait staff ($1154) and childcare workers ($1063).
It hardly seems fair that these essential workers should have limited options when it comes to buying a home. Let’s look at their options city by city.
No surprises here. Sydney offers the least choice. The research found low-income earners could only 2.9% of stock, while medium income earners could access 38.7% of stock.
Throwing back to the info on the table above, with average home prices around $950,457, you’d need an average weekly income of of $2633 and a $190,091 deposit to avoid mortgage stress.
In Sydney, the average weekly earnings are $1752 — which amounts to $881 less than required.
In Melbourne, things are slightly better, but not by much. Low income earners can only buy 4.2 per cent of property, while those on a medium income could buy 43.7 per cent of property
Given that the median property price in Melbourne is $744,679 – you’d need a deposit of $148,936 and a weekly wage of $2063 to comfortably afford a typical home.
The average weekly earnings here is currently $1715 – which is $349 less than necessary.
Finally, a bit of sunshine! Things are not so grim in Brisbane. Low income earners can afford 26.7 per cent of properties, medium earners can buy 74.9 per cent of stock.
Here, you’ll only need a $111,659 deposit to purchase a home at the local median of $558,295. The weekly income needed to avoid mortgage stress in Brisbane would be $1547 — $64 under the average wage of $1611.
Other than taking out a second job, what can you do?
It’s really important to get your finances sorted – not just in your head, but on paper. The bank doesn’t care about your personality, they just care about serviceability. So go ahead and get rid of those credit cards, consolidate your personal debt and be sure to document all of your income – side hustle and all.
As always, if I can help in anyway, please reach out!