Single Australians are most at risk of never being able to afford a home as house prices and interest rates soar.
House prices have continued to rise, especially in Australia’s capital cities, despite the Reserve Bank raising interest rates 13 times in 2022 and 2023.
More aggressive rate increases since 1989 have also reduced what banks can lend, as today’s borrowers struggle with much higher monthly mortgage payments.
In Sydney, a borrower now needs to be among the top 3.8 per cent of earners, with a salary of more than $220,000, even to get a loan for a typical home, and will still be in mortgage stress.
Mozo personal finance expert Rachel Wastell said single people were now unable to buy a home.
Single Australians are the career group now considered most at risk of never being able to afford a home.
In Sydney, a borrower now needs to be among the top 3.8 per cent of earners, with a salary of more than $220,000, even to get a loan for a typical home, and will still be in mortgage stress.
“With home prices soaring and interest rates rising, the proportion of income needed to pay a mortgage is at a record high, making it increasingly unlikely that singles will be able to afford to buy a home. on their own,” he said.
Australia’s median house price of $848,383 is now so expensive that someone with a 20 per cent deposit of $169,677 would need to earn $130,520 to even qualify for a $678,706 loan.
This is based on the fact that banks can now only lend to a borrower 5.2 times their salary, before taxes.
Even then, a homebuyer would be in mortgage stress borrowing at maximum capacity and devoting more than a third of his or her income to servicing the loan.
In Sydney, the median house price in May was $1.442 million, CoreLogic data showed.
This meant that someone needed to earn $221,840 to even get a loan of $1.154 million with a hefty deposit of $288,391.
Mozo personal finance expert Rachel Wastell said single people were now unable to buy a home.
This person would still be in mortgage stress despite being among the top 3.8 per cent of earners who had taxable income of more than $217,718 in 2021-22, new tax office data released on Monday.
Wastell said single people should consider buying with a family member or friend to get into the property market.
“By pooling resources, singles could increase their purchasing power and share the burden of high payments, making it easier to enter the housing market,” he said.
“Collaborating with family or friends to purchase a property can be a smart decision, but it is vital to approach it with clear agreements and have everything in writing.”
