Buying a home in Australia remains a challenge for many, with property prices and interest rates impacting affordability across different cities. Understanding the income required to afford a home without falling into mortgage stress is essential for prospective buyers.
Income Requirements by City
Recent data highlights the minimum after-tax income required to afford a median-priced home (as of February 2025) in Australia’s major cities:
Sydney: Sydney remains the most expensive city for homeownership.
Median house price: $1.44 million
Required household income: $280,000 per year
In high-demand areas such as the Eastern Suburbs, affordability is even more challenging. A couple would need to earn $308,000 each to purchase a $3.7 million home.
Melbourne: While more affordable than Sydney, Melbourne still requires a substantial income to buy a home.
Median house price: $917k
Required household income: $160,000 per year
Outer suburbs and apartment markets offer lower-cost alternatives, but affordability remains a concern.
Brisbane: Brisbane has surpassed Melbourne as the second most expensive capital city for houses.
Median house price: $977k
Required household income: $176,000 per year
Despite the increase in home prices, Brisbane still offers relatively lower-cost options compared to Sydney.
Perth: Homeownership is more accessible, with houses needing an income of $155,000.
Adelaide: The required after-tax income is $157,000 for a house.
Canberra: Median house price: $968k
Required income: $178,000 per year
Hobart & Darwin:
Hobart: $132,000 required income
Darwin: $104,000 required income
Factors Influencing Affordability
Several factors contribute to home affordability, including:
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Interest Rates: Higher rates increase monthly repayments, making home loans less accessible.
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Deposit Size: A larger deposit reduces the borrowing amount and interest paid over time.
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Government Incentives: First-home buyer grants and stamp duty concessions can reduce initial costs.
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Cost of Living: Rising expenses in other areas may impact a buyer’s ability to allocate funds for homeownership.
Alternative Housing Options
For buyers struggling to meet income thresholds, alternative housing solutions include:
Regional Markets: Properties in regional areas often come with lower price points and may offer better value compared to metro markets. Some buyers are relocating for lifestyle benefits and affordability.
Co-Ownership: Sharing ownership with family, friends, or through structured co-ownership agreements can reduce individual financial burden and make homeownership more accessible.
Off-the-Plan Purchases: Buying off the plan can provide a longer settlement period, allowing buyers to save more before completion. Some developments also offer incentives, such as stamp duty concessions or developer discounts.
House and Land Packages: These packages, particularly in outer suburban growth areas, offer a more affordable entry into the housing market. They often come with fixed-price contracts, reducing the risk of unexpected costs during construction.
The 30 per cent rule of housing affordability states that mortgage repayments should not exceed 30 per cent of a household’s income. Given current property values, many buyers are also turning to alternative strategies, such as:
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Government incentives and first-home buyer schemes
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Exploring regional or outer-suburban markets
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Rentvesting (renting while owning an investment property elsewhere)
Planning for Homeownership
With affordability barriers continuing to rise, prospective buyers need to carefully assess their financial position. Household income, deposit savings, and interest rates all play a crucial role in determining borrowing power.
Seeking financial advice, comparing lenders, and considering different property types can help buyers navigate the market and secure a home within budget.
Publisher Website: www.homeshelf.com.au