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If rising interest rates and property prices weren’t enough pressure on prospective homeowners, new research indicates that Australians don’t earn enough to purchase a house without experiencing mortgage hardship.

In the nation’s major cities, salaries fall up to $145,000 short of what would be required to comfortably cover a mortgage and other family expenses.

Sydney Mortgage Affordability

Sydney residents must earn the highest, with a pre-tax income of $239,480 necessary to meet repayments without difficulty.

According to new statistics, prospective homeowners do not earn enough to escape mortgage stress. The average house price in Sydney has once again surpassed $1 million, according to figures released today by CoreLogic. If the median home value in the port city is $1.2 million, then the monthly mortgage payment is $5,900. To comfortably afford this, though, a purchaser must earn $239,000 annually. Yet, the average salary in Sydney is $94,000, thus there is a $145,000 gap between the average income and the amount needed to make homeownership possible.

Mortgages in Other Capital Cities

Potential homeowners in Perth or Darwin must earn $115,000 to avoid mortgage difficulty. Canberra follows Sydney in needing the maximum income of $183,000 to escape mortgage stress. Yet, the average salary in Canberra is just $104,000, leaving many people $78,000 short. In Melbourne, prospective homebuyers earn $93,000, which is $81,000 less than the median wage required to purchase a property. In Brisbane, prospective homeowners must make $58,000 more than the average, whereas in Adelaide, they must earn $48,000 more.

Cash Rates and Single Incomes

With increasing house prices and higher interest rates, prospective homeowners might face immediate mortgage difficulty. Rising property prices are solidifying the inability of a single-income person to own a house without experiencing considerable mortgage stress. Since experts anticipate a pause, all eyes are on the Reserve Bank of Australia and its decision about the cash rate this month.

However, even if the cash rate is halted, mortgage stress will persist. Potential homeowners must explore all of their possibilities and where two incomes may assist alleviate mortgage burden, mortgagees may look at partnering with others to get their foot in the door. Buying an apartment instead of a home might minimise the amount of income needed to service a mortgage, and shared equity programmes are also an option for purchasers looking to join the housing market.

Intergenerational Wealth

The bank of mum and dad is also an option, but as interest rates increase and the number of parents able to help decreases, this bank is rapidly shutting. Another 0.25 percent interest rate increase this month would add $82 to the monthly payments for a $500,000 loan, but the total cost of interest rate increases over the last year is $3,236, meaning even if parents can assist with deposits, on going servicing issues may still persist.

Summarising Results

With all this taken into consideration, it means potential mortgagees may need to change their acceptance level of where they want to live, and what they want to buy. Increasing income through pay rises or upskilling through education, or partnering with others may also assist in entering the market. While this is all easier said then done, it is clear that careful consideration and actions need to be considered, and planned for, when calculating the purchase of property and on-going affordability.