Higher interest rates and cost-of-living pressures are forcing mortgage holders earning half a million dollars to consider moving back in with their parents.
Shore Financial chief executive Theo Chambers said even young couples with a combined household income of between $400,000 and $500,000 were struggling to pay their $2 million-plus mortgage in areas of Sydney especially if they had children in daycare.
“There are many people who return to live with their families so they can get rid of childcare expenses, rent their property, not sell it,” Mr. Chambers told the Sydney Morning Herald.
‘They can see that in a few years, once their children go to school, things will be easier. While their children are still in daycare, it is very expensive for them to continue working.”
He said high-income couples had bought when interest rates were at two per cent – a figure that now seems a distant memory – and would have thought “we can easily afford a $3 million house in Bondi”.
However, since they have had children and do not qualify for child care subsidies, they must shell out $7,000 a month in fees.
Without being able to refinance their mortgagesThey have cut back on discretionary spending and vacations and reduced it to just one car.
Mr Chambers said people like this feel “stuck” and that even though they had done all the “right things” and “ticked all the boxes”, they were still struggling.
Higher interest rates and cost of living pressures are forcing couples earning half a million dollars to consider moving back in with their parents (file image)
Mortgage Choice Dee Why director James Algar said he was dealing with high earners who had emptied their savings to maintain their mortgage.
He said that while most of these people were not in truly dire financial straits or contemplating selling, they were feeling the pressure.
So far, he said, only a few are downsizing to reduce the mortgage or moving.
Others are forced to cut back on children’s recreational activities or other expenses.
Demographer Simon Kuestenmacher said housing affordability was determined by the relationship between house price and income.
‘Not even the rich can afford a house comfortably. “It’s not the most tragic thing… (But) the situation for the people in the middle is absolutely terrible,” he said.
Kuestenmacher said this caused young people to feel alienated because they look at the economic system and say “it doesn’t work for me.”
According to a 2024 Demographia report, Sydney, Melbourne and Adelaide are among the top 10 most unaffordable cities in the world, with Hong Kong topping the list.
Theo Chambers, chief executive of Shore Financial, said even young couples with a combined household income of between $400,000 and $500,000 were struggling to pay their $2 million-plus mortgage (file image)
The average cost of a house has doubled in Australia in the space of just 13 years, from less than $500,000 in 2011 to almost $1 million in 2024.
An ANZ Corelogic report on housing affordability has shown that Sydney house prices now cost 10 times the median wage.
In July, research led by property experts Mustapha Bangura and Professor Chyi Lin Lee found that the average full-time income was no longer good enough to enter the property market anywhere in Sydney.
The couple who were not found anywhere in Sydney were affordable based on the 2021 NSW median weekly earnings for part-time employees of $600, as well as the median weekly earnings for full-time employees of $1,500.
Proximity to the city was found to be a factor in the study, with potential home buyers being more challenging the closer the property is to Sydney’s CBD.
Interest rates were held at a 12-year high of 4.35 per cent at the last Reserve Bank of Australia meeting in early December.
The cash rate is now higher than equivalent policy rates in New Zealand and Canada, as other first world nations get relief.
Gov. Michele Bullock gave a strong hint that rate cuts could take months to realize that inflation is still too high, ahead of next year’s election.