Aussie homes have a reputation for being some of the most expensive on the planet, especially in Sydney and Melbourne. While there’s more to the Australian housing market than its two biggest capitals, there’s also much more to the story when it comes to housing affordability. We’ve gone behind the scenes to find out what ‘average’ really looks like across Australia, and to see if you might get more for your dollar outside the south east corner.
Looking at raw property prices, Sydney regularly tops local and global lists of the world’s most expensive cities. As shown in Table 1 below, Sydney’s average cost of a dwelling – that includes houses and units – is over $200,000 more than the next highest, Melbourne. To get more bang for your buck, you could consider heading south to Tasmania, or even north to Queensland where an oversupply of units in Brisbane is keeping prices within reach.
On the face of it, lower housing prices could make an interstate move worth considering. But before you rule any location in or out, there’s a range of other important factors to consider – average costs of living, availability of employment and salary levels in different states and cities.
It’s all about affordability
While Sydney takes the crown for the most expensive real estate, the city doesn’t boast the highest annual income, placing third behind Darwin and Canberra. That all adds up to a higher likelihood of mortgage pressure for Sydney homeowners since almost 45% of the average household income needs to be earmarked for mortgage repayments. Melbournians are similarly placed, needing to find 37.9%.
As a benchmark for affordability, Darwin tops this list with homeowners only needing 23.8% of their average annual income to cover their home loan repayments. At 29.4% and 27.5% respectively, Perth and Canberra are as affordable as Hobart, where, despite the nation’s lowest household incomes, homeowners need to pay around 30% of their income in mortgage repayments.
Getting a foot on the property ladder is also a challenge, even outside the capitals. The cost of a 20% deposit in NSW, VIC, QLD and WA is still more than the average annual household income. And even though prices are lower, as median incomes are lower too, getting on the property ladder in Tasmania will still mean saving more than the average annual household income.
Average house price growth is another factor to consider. True to form at the top of the table, Sydney property prices are expected to rise by almost 7% this year. Surprisingly, Melbourne looks flat while Brisbane is expecting to see over 6% growth. With around only 3% projected growth in Darwin and Canberra, lower median prices in Adelaide, Perth and Hobart could deliver a higher expected price growth.
It’s about more than just paying the mortgage
If it was just about paying the mortgage, then the choice would be simpler and we’d all be off to Darwin. But as we have to eat and pay the bills, it’s worth looking at how a few of the everyday household expenses compare across the country. Table 2 looks at the average costs of groceries and electricity.
Putting together a basket of groceries every week will take the biggest chunk of your income in the NT, so it’s just as well that Darwin homes cost less. Electricity costs are also high in the NT, though you’ll have to pay even more every year if you head to Tassie instead (see Table 2). Depending on where you’re considering, heating or cooling costs should always be an expense to think about.
And since you need to earn a living to pay the bills it’s worth noting that at 4.5%, unemployment in NT is well below the national average of 6.3%, and much lower than Tasmania where it’s a somewhat substantial 7%.
NSW and Victoria are amongst the most affordable when you look at the costs of groceries and electricity. These savings, however, only go a tiny way in offsetting the high cost of housing. Unsurprisingly both have below-average rates of unemployment at 5.7% and 6.0% respectively.
While a few dollars difference in the cost of filling your grocery basket isn’t likely to be a deal maker or breaker, it does reinforce that there’s a range of factors to consider if you’re weighing up your options. Looking at averages, you may be able to earn more and spend a lower percentage of your income on your mortgage in Darwin, but you can expect to pay more for household expenses. On the flip side, while Adelaide and Hobart have Australia’s lowest median household incomes and the lowest median house prices, they are amongst the nation’s top 3 most expensive for electricity costs.
So which state has the most affordable ‘average’?
Looking at averages, you may be able to earn more and spend a lower percentage of your income on your mortgage in Darwin, but you can expect to pay more for household expenses. Lower population growth in the NT is also reflected in lower forecast house price growth.
On the flip side, while Adelaide and Hobart have Australia’s lowest median household incomes and the lowest median house prices, they are amongst the nation’s top 3 most expensive for electricity costs. Tasmania and South Australia also have the highest rates of unemployment at 7% and 7.6%, so making a move without assured employment could be risky.
With already low electricity costs expected to drop, a relative cheap basket of groceries, forecast growth in house prices, and median dwelling prices among the lowest in the country, Queensland is looking like an all-round attractive place to live.
A below average unemployment rate of 5.1%, lower median dwelling prices and with income to home loan repayments ratios under 30% reducing mortgage stress, also puts WA on the map; and although it’s at the high end of the grocery bills, electricity is reasonable by comparison.
There’s no doubt NSW and Victoria are the most expensive ‘averages’ in terms of housing affordability, but they rank well for economic and population growth, factors that might impact job security and housing availability.
Deciding where to live is about more than just crunching the numbers. When we’re buying a home there’s a whole host of other factors to add to the mix. Wherever you think you could live, however, considering affordability is always a great starting point. And getting the right deal on your mortgage is a big part of the process. Talk to an Aussie broker today about finding the mortgage that can work hardest for you.
You may also find these insights from Aussie helpful as you plan your property search.