A devastating new report has laid bare the crushing reality facing millions of hard-working Australians aspiring to own their own home, revealing a 'dire' and growing chasm between property prices and household incomes.
The Stark Numbers Behind Australia's Housing Crisis
Property data firm Cotality's annual Housing Affordability Report, released on Tuesday, delivers sobering statistics. Since March 2020, home values have skyrocketed by 47.3 per cent, pushing the median dwelling value up by $280,000 to reach $872,500.
During this same turbulent period, the median annual household income managed only a 15 per cent increase, reaching $104,390. This dramatic mismatch has created what experts describe as a structural shift in who can realistically enter the property market.
'For first home buyers, the metrics are pretty disappointing,' stated Eliza Owen, Cotality's head of research. 'There's this real disparity between where incomes are and where property prices are that show a kind of structural shift in who can access the market.'
Affordability Metrics Hit Record Highs
The situation appears particularly bleak when examining Cotality's affordability measures. Three out of four key metrics have reached record highs: the price-to-income ratio, years required to save a deposit, and the proportion of income needed for rent.
The sole metric showing slight improvement - the portion of income needed to service a new mortgage - has decreased from its peak to 45 per cent of household income. This minor relief stems from the Reserve Bank's three interest rate cuts since February, though it remains at historically high levels.
What Drove The Five-Year Price Surge?
Multiple factors converged to create this perfect storm in housing affordability. Pandemic-era stimulus measures, historically low interest rates, government incentives for first home buyers, and a rapid rebound in net overseas migration after borders reopened all fuelled unprecedented demand.
Meanwhile, housing supply failed to keep pace. Construction sector insolvencies, rising material costs, and changing preferences for larger homes with smaller household sizes exacerbated the shortage. The report indicates a mismatch of more than one million new households formed in the past five years compared with just 880,000 new dwellings completed.
'There's been this extraordinary separation between property prices and income,' Ms Owen observed. 'It definitely speaks to a widening in the divide of the haves and have nots when it comes to the property market.'
The Reality For Aspiring Homeowners
The practical implications are staggering. In Sydney's exclusive eastern suburbs, an average wage earner would need 35 years to save a 20 per cent deposit for a median-priced house. Even overcoming that monumental hurdle, servicing the mortgage would consume one-and-a-half times their entire income.
This situation has created a self-perpetuating cycle where existing homeowners and investors reinvest substantial capital gains back into the property market, further widening the gap for first-time buyers and those without parental assistance.
Glimmers Of Hope In Some Markets
Amid the bleak national picture, Canberra, Hobart and Melbourne offer pockets of relative relief. Canberra's rental affordability has improved thanks to a relatively high rate of new apartments entering the market combined with slower internal migration.
Melbourne presents an intriguing case study, where increased taxes on investment properties have structurally kept home values lower across the city. The median dwelling value sits at 7.1 times income, significantly better than Sydney's multiple of 10.
'It might take some time to tease out exactly what kind of impact the increased investment taxation has had,' Ms Owen noted, 'but I think it's fair to say it has at least helped to take some heat out of the market, and many people look to Melbourne now as a relatively affordable buying option.'
This suggests that targeted policy interventions could provide some relief in markets where supply constraints remain challenging, offering potential pathways for other cities grappling with similar affordability crises.
