Many of us find ourselves continually surprised by the relentless rise in property prices. The market often feels like a distant dream, slipping further out of reach with each passing year. But is this truly a new phenomenon? Let’s examine the data and explore how incomes and property prices have evolved over time.

How Property Prices Have Changed Over the Decades

The relationship between income and property prices was different in the past, yet affordability challenges still persisted. For example, Housing Affordability Australia data shows that in the 1980s, the median house price was about $64,800 in Sydney and $40,800 in Melbourne. Back then, property prices were lower due to less demand, fewer investors, and more favourable lending and taxation policies. In contrast, today’s market is influenced by high population growth, limited land supply, and attractive incentives for investors. Domain House Price Report for 2023 shows property prices have now surged to $1,627,625 in Sydney and $1,032,020 in Melbourne.

In the 1980s, the average weekly household income was about $311. When adjusted for inflation, this amount increased to $1,886.50 in 2023, ABS statistics show. Despite this increase in income, the rate of property price growth has outpaced the rate of income growth, amplifying the affordability issue. Data from CoreLogic over past 20 years revealed house prices in Australia have surged by 193.1% in real terms, far outpacing the 81.7% increase in wages as measured by the Wage Price Index (WPI).

The Growing Challenge Today

Affording a home today is much tougher because of the dramatic increase in the house price-to-income ratio. Back in the 1980s, home prices were about four times the average household’s disposable income. Now, that number has jumped to 16.6 times. This big leap highlights how much harder it is for new buyers to get into the market now, compared with a few decades ago. The path to homeownership isn’t just steeper; it has become much more challenging. It demands careful financial planning and larger savings, and often requires waiting much longer before buying a home becomes a realistic goal.

5 Smart Home Buying Tips

If you’re considering buying a home and are worried about affordability, you’re not alone. Here are some important things to keep in mind to help you make the best decision.

First, consider if this home will add value to your life. Homeownership is about more than having a place to live; it’s about building something of your own and securing your financial future. Reflect on whether you’re ready for the long-term responsibility and if this home aligns with your personal goals.

Next, examine your motives. Are you buying to meet your family’s needs, build generational wealth or achieve a personal milestone? Understanding your reasons ensures your decision is based on what truly matters to you.

Affordability is crucial. Determine if the home fits within your budget and how you plan to finance it. Consider your job stability and if you can maintain a steady income to cover mortgage payments without compromising your health or work-life balance.

Conduct thorough research. Look for properties with high growth potential in desirable locations. Consider the ease of resale and rental yield potential. These considerations become more or less important depending on whether you’re buying a home to live in or an investment property. Ensure the property fits your budget and calculate monthly utility costs. Weigh the pros and cons of renting versus buying.

Timing is key. Buy when you can afford it without overstretching your finances. Ensure you have a stable income, savings for a deposit, good money-management skills, and a good credit score. Explore government assistance for first-time buyers.

Reflecting on these points will help you navigate the property market and make a confident, informed decision about buying a home.

We Make Homeownership Achievable

While the property market can seem impossible to attain, especially as prices continue to rise, it’s not an insurmountable challenge. With careful planning, strategic financial decisions, and a bit of creativity, owning a home can be within your reach. Remember, it’s not just about luck – it’s about making informed choices and leveraging the resources available to you.

Contact our mortgage experts now! Call us today on 1300 889 743 or enquire online for free to find out how!