Sydney, Hobart 'unaffordable' for almost half of first home buyers

author-avatar By on April 01, 2021
Sydney, Hobart 'unaffordable' for almost half of first home buyers

Housing affordability looks pretty bad for first home buyers in Sydney and Hobart, while those in Perth, Brisbane and Adelaide fare a little better.

Research from the National Housing Finance and Investment Corporation (NHFIC), which administers the First Home Loan Deposit Scheme (FHLDS), has analysed the portion of properties first home buyers can afford based on their incomes. 

This data was collected in June 2020 - nine months of soaring house prices ago - and it shows low rates of housing affordability for first time buyers on low or even moderate incomes. 

According to the research, the bottom 60% of income earners looking for their first home can afford just 10–20% of properties in Sydney and Hobart. 

The median dwelling value in these cities is now $923,028 and $548,686 respectively. 

Renters in these cities don't fare much better, with 0–10% of homes considered affordable for the bottom 40% of income earners.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Rates correct as of September 25, 2021. View disclaimer.

'Affordable' in this instance refers to the ability of a household to meet its housing costs (like a mortgage or rent) without compromising basic needs like food or medicine. 

This can also be called rental or mortgage stress, which is generally defined as 30% or more of take home income being spent on housing. 

Melbourne too has poor affordability for some first home buyers as well as renters. 

In the Victorian capital, only 10-20% of properties are affordable for the bottom 40% of income earners, but it gets slightly better, as the bottom 60% of the market can afford between 50% and 60%. 

Rentals were deemed unaffordable for the bottom 20-40% of income earners in Melbourne, but this was the case in most capital cities. 

See also: Rental affordability the best in 13 years (as long as you aren't on JobSeeker)

clhpmar201Source: CoreLogic

Brisbane the most affordable for first home buyers 

While Sydney and Hobart might look unaffordable, the story isn't quite so bad in other capital cities. 

NHFIC's research shows the most affordable city for potential first home buyers is Brisbane: the bottom 40% of income earners can afford to pay off a mortgage for around 60–70% of homes in the sunshine state capital. 

Meanwhile Perth is the best city for rental affordability, as 90-100% of all rental properties are deemed affordable for the lowest 40% of incomes. 

Perth and Adelaide fared quite well in terms of housing affordability, falling just behind Brisbane - see the infographic below for the full breakdown of how many properties are available in each capital city based on income groups. 

Related: Top 10 affordable Australian regional areas in 2021 revealed

First home buyer numbers are still high. How? 

According to Australian Bureau of Statistics data (ABS), lending to first home buyers rose to a 12 year high in January 2021, occupying a market share of 36.5%. 

This seems counter-intuitive based on these affordability statistics, and the fact that house prices have only continued to grow so fast since then that regulators have weighed up stepping in

There are a number of reasons why first home buyers are still entering the market in droves. 

First of all, separate NHFIC data shows much of this growth is being driven by the number of state and federal grants available, like HomeBuilder, the First Home Owners Grant (FHOG), or stamp duty concessions

The combined value of the schemes and concessions can be worth tens of thousands in grants when used together. A first-time buyer in Victoria and NSW could qualify for up to $86,000 and $85,000 worth of grants and concessions respectively. 

These bonuses help certain buyers enter the market sooner, but also boost demand and therefore are partly responsible for booming prices. 

Other reasons include:


Photo via Joan You on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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