How we compare...earnings / mortgages

[Tamara (Homes Down Under)]

Property is certainly not cheap in Australia.

 

These figures show how much you would have to earn in the various capital cities to service a mortgage.

 

 

This is the minimum you need to earn in your city just to pay the mortgage

 

DECEMBER 5, 20153:38PM

Homeowners in Sydney have the toughest task paying off the home loan. Picture: John Appleyard

Kirsten Crazenews.com.au

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SIX figures. It’s the minimum households need to earn in five of the eight capital cities if homebuyers want to avoid mortgage stress and comfortably service a home loan.

But depending on which Australian capital you call home, paying off the mortgage is manageable, or an all-consuming financial burden. And then there’s the rest of life to pay for.

After crunching the numbers on home loan repayments, broker Mortgage Choice calculated the bare minimum a household needs to earn in each capital city in order to fit the bill.

Unsurprisingly Australia’s priciest capital, Sydney, is home to the greatest financial pain. Based on the median house price for the greater metropolitan area ($840,000 according to CoreLogic RP Data) Sydneysiders need to be pulling in at least $154,482 a year before tax. And that figure jumps significantly higher for those buyers househunting within 20kms of the CBD where the median house price skyrockets to about $1 million.

To get into a unit in Sydney, couples would need to pocket a huge $115,000 annually.

Unsurprisingly Sydneysiders have the greatest mortgage burden. Picture: John AppleyardSource:News Corp Australia

In Melbourne, where the median house price is lower at $575,000, the annual household income would have to be more than $104,666 to avoid mortgage stress. For units that combined salary drops to $86,436.

Canberra and Darwin actually clocked higher than the Victorian capital with the necessary household income required to service a home loan sitting at $106,666 and $105,792 for houses.

According to the finance industry, “mortgage stress” usually hits when households are spending more than 30 per cent of their combined earnings on paying off the home loan.

Just this week the Real Estate Institute of Australia and Adelaide Bank put out its latest Housing Affordability Report, in which it showed the proportion of income required to meet loan requirements had increased by 1.4 per cent over the quarter to 31.7 per cent.

In Melbourne, households need to earn $104,666 to pay off the home loan. Pictures: Tim CarrafaSource:News Corp Australia

“Obviously Sydney is incredibly expensive so it didn’t surprise me to see that people need a household income of $150,000 plus in order to comfortably service a home loan,” Jessica Darnbrough, of Mortgage Choice, said.

“But Sydney’s very lucky in that there are many different industries. It’s a corporate culture, not just driven by one particular industry, which has been the case in areas like Perth and Darwin,” she said.

“It was interesting to see the results of places like Darwin. They might not have seen such stellar growth over the last 12 months, but obviously prior to that they’ve enjoyed some great growth. That’s obviously reflected in the average income needed to service their loans,” she said.

Darwin households need to earn a minimum of $105,792 to avoid mortgage stress. Picture: Tourism NT

Life gets a whole lot cheaper in Adelaide and Hobart where gross household earnings only need to be $77,241 and $64,827 respectively to manage a home loan comfortably.

The figures are based on loan repayments at a 5.61 per cent interest rate (the average rate of the major lenders) after borrowers put down a 20 per cent deposit.

“The figures really speak for themselves. In the more expensive capital cities, the more you need to earn. But thankfully in those more expensive capital cities’ residents do tend to earn more,” Ms Darnbrough said.

Hobart locals only need to be earning $64,827 to pay off the average house. Picture: Kyle GardnerSource:News Corp Australia

“While I think it probably all works out in the wash, those statistics are actually around comfortable mortgage repayments — not tipping over into mortgage stress. But realistically, if you want to be adding things like children to the household, or buy a car, or if you have other debt like credit cards then you may need to earn even more.”

So how much you need to earn to pay off the home loan?

Sydney

House: Minimum household income — $154,482 ($840,000 median price)

Unit: Minimum household income — $115,862 ($630,000)

Canberra

House: Minimum household income — $106,666 ($580,000)

Unit: Minimum household Income — $76,689 ($417,000)

Darwin

House: Minimum household income — $105,792 ($575,250)

Unit: Minimum household income — $84,597 ($460,000)

Melbourne

House: Minimum household income — $104,643 ($569,000)

Unit: Minimum household income — $86,436 ($470,000)

Perth

House: Minimum household income — $101,149 ($550,000)

Unit: Minimum household income — $80,000 ($435,000)

Brisbane

House: Minimum household income — $89,655 ($487,500)

Unit: Minimum household income — $73,011 ($397,000)

Adelaide

House: Minimum household income — $77,241 ($420,000)

Unit: Minimum household income — $62,528 ($340,000)

Hobart

House: Minimum household income — $64,827 ($352,500)

Unit: Minimum household income — $50,574 ($275,000)

* Disclaimer: results worked out using a 5.61 per cent interest rate (average standard variable rate of all the major banks) and calculated assuming buyer has a 20 per cent deposit and were only contributing 30 per cent of their income to mortgage repayments. Salary figures are before tax.

[deryans]

I realise these are minimums, but they give the impression that it's do able, these are well below what is realistic, in 2011 the advice (internally in the realestate community) in Sydney was that if you're not on 150K+ you are on struggle street ?

 

I'd add at least 50% to each of those gross salary figures (tax, kids, car, dog, cat whathave you)

 

this makes the sydney figure 220+ , which is about right andthe adelaide figure 120+ (good luck finding a job that pays that in adelaide)

[xzibit]

Plenty of jobs pay $120k plus in Adelaide. $80k-$90k is about average.

[deryans]

Plenty of jobs pay $120k plus in Adelaide. $80k-$90k is about average.

 

 

120's a minimum, 90K is too low, I'd say you need 150 at least to live in adelaide, my brother in law had to wait over 10 months to find another role paying 150k, and he is from adelaide with a very well developed set of contacts, the word plenty is simply misleading.

[NicF]

120's a minimum, 90K is too low, I'd say you need 150 at least to live in adelaide, my brother in law had to wait over 10 months to find another role paying 150k, and he is from adelaide with a very well developed set of contacts, the word plenty is simply misleading.

 

Rubbish. There are plenty of people living in Adelaide on less than $150k a year perfectly happily. And they are not all living in Elizabeth either. We have lived happily on $85k a year while renting (at $420 a week) and are comfortable on about $135k a year with a $375k mortgage. We have also managed on $56k a year while renting but this was a struggle, but partly because we were renting based on earning the $85k a year. If we had to live on the $56k for any length of time we could have rented a much cheaper place than the one we had.

 

I like your your first post because I agreed that the minimum earnings for the property prices given seemed a bit on the low side for a comfortable life to me but saying you need at least $150k to live in Adelaide is taking things way too far. And you don't need lots of roles paying over $120k or even $150k, you just need two people earning $120k or more between them which is much more realistic and achievable.

[xzibit]

120's a minimum, 90K is too low, I'd say you need 150 at least to live in adelaide, my brother in law had to wait over 10 months to find another role paying 150k, and he is from adelaide with a very well developed set of contacts, the word plenty is simply misleading.

 

I think you misread my post. I didn't say $120k was plenty, I said that there's plenty of jobs paying $120k.

[Tamara (Homes Down Under)]

The thread relates to income / mortgages.

 

It's not true that you need between $120,000 to $150,000 to live in Adelaide. Let me just say that again...IT"S NOT TRUE. Some people will write anything to prevent people moving here.

 

There are many people moving here who earn much less than that and still have a great quality of life.

 

What is difficult in the earnings to mortgage ratio is the issues around young people and housing affordability. Young people struggle to save a deposit. A 20% deposit means that the banks will not require lenders insurance which is a punitive payment. Young people on low incomes struggle to accumulate this deposit and combined with the stamp duty, home ownership is often out of reach for low income earners.

 

I know plenty of low income earners who are trying to get their foot into the housing market. Typically (in my family circumstances) the couple may be comprise a wage earner of around $40,000 where the partner is still studying. Maximum loan in this case would be around $250,000 which won't buy anything in todays market. Once the second income comes into play (and this has just happened with my sons partner) they can now afford a property in the mid $350,000's and the mortgage that they would be paying on this property is comparable to renting.

 

Another important point. Many people who move here have many years of work under their belts and have savings or a property with some equity. This provides them with a deposit, costs and access to a home in Adelaide after a short period of renting.

Your wealth and earnings will determine where you live but as NicF says a lower income doesn't mean that you will be destined for a lower sub economic suburb. If you look at how many people are breaking leases and buying homes in great affordable suburbs, it's an indication that people are settling, buying homes and making it work here.

[notpom]

There are few points (gadzilion cents worth)

 

1. Article in newspapers got written by journalists. Lets not talk about such things like the fact that jornos write whatever their bosses tell them. Just one question. What area exactly jornos are specialists in? Answer lays on the surface. They are specialists in nothing.

 

2. You perhaps heard of James Packer. He is son of Kerry Packer. Kerry Packer is famous by a few things. He was media magnate. He was the richest person in Australia. He made few billions dollars a year in personal income. He never paid more than 0 cents in income tax. Media says that he declared zero income. This is not true. Every year Kerry declared negative income, aka loss.

If you have not got where I am getting to - I get to the situation that by the standard bank criteria banks would not let Kerry to have a credit card. However (naturally) he would have unlimited borrowing capacity with any bank.

 

3. In Adelaide property prices range from $150,000 (asking price, meaning that with some negotiation you can get it for $140,000)

For those who can not search realestate.com and think I am producing bovine excrement, here is the link

http://www.realestate.com.au/property-house-sa-davoren+park-121354166

For the upper range - sky is the limit, it is somewhere around 12 million I think. To get $140K property you need $25K, to get 12 million one - $80K salary is not sufficient (mildly speaking. You need negative income to have this one)

 

4. When jornos talk about $80K needed to buy in Adelaide, this is not the single income, but combined household income. Say $30K + $50K. Very ordinary.

 

5. Talking about the price of the property as a number of annual incomes is completely pointless. There is no correlation between these two at all. If we take a world as a whole, Australia with the average price of property being 8-9 average annual incomes looks extremely affordable. About 80% of the countries have greater price to income ratio.

 

In other words, articles like this - it is not worth even to dignify authors by reading them

[keldaz]

Rubbish. There are plenty of people living in Adelaide on less than $150k a year perfectly happily. And they are not all living in Elizabeth either. We have lived happily on $85k a year while renting (at $420 a week) and are comfortable on about $135k a year with a $375k mortgage. We have also managed on $56k a year while renting but this was a struggle, but partly because we were renting based on earning the $85k a year. If we had to live on the $56k for any length of time we could have rented a much cheaper place than the one we had.

 

I like your your first post because I agreed that the minimum earnings for the property prices given seemed a bit on the low side for a comfortable life to me but saying you need at least $150k to live in Adelaide is taking things way too far. And you don't need lots of roles paying over $120k or even $150k, you just need two people earning $120k or more between them which is much more realistic and achievable.

 

There are plenty of people living on well under $150k per annum in Adelaide, in fact your quote above of $85k a year income and renting at $420 a week is very accurate, providing you are more or less debt free. I know this as the figures are an exact mirror of our current situation. If however we decided we wanted to buy our current rental, that figure would jump up significantly and deryrans $150k quote is smack on target. Adelaide's quite a big place so it's best not to generalise, I know you can get a nice house for your 375k, but not in area's we would consider personally. BTW took a drive out to Elizabeth the other weekend, as we parked the car a young guy sprinted past with a policewoman hot on his heels, apart from that I didn't think it looked too bad up there, I've seen far worse suburbs that's for sure.

[NicF]

There are plenty of people living on well under $150k per annum in Adelaide, in fact your quote above of $85k a year income and renting at $420 a week is very accurate, providing you are more or less debt free. I know this as the figures are an exact mirror of our current situation. If however we decided we wanted to buy our current rental, that figure would jump up significantly and deryrans $150k quote is smack on target. Adelaide's quite a big place so it's best not to generalise, I know you can get a nice house for your 375k, but not in area's we would consider personally. BTW took a drive out to Elizabeth the other weekend, as we parked the car a young guy sprinted past with a policewoman hot on his heels, apart from that I didn't think it looked too bad up there, I've seen far worse suburbs that's for sure.

 

If you have a 20% deposit you can spend a fair bit more than $375k on the actual house. The figures quoted in the original article are the amounts you would need to earn to buy a house with a 20% deposit, so for the $420k quoted above you would actually have a mortgage of around $336k with a 20% deposit. And you certainly do not need an income of $150k to live comfortably with a mortgage of this size. Our mortgage was $375k, not the house price, and we earn less than $150k and live very comfortably. With a 20% deposit on a mortgage of $375k you could afford a house for around $450k. Not sure if you could buy a house worth living in here in Rostrevor but there are plenty of very nice suburbs just a bit further north/North East of here where $450k would get you a very nice house.

[keldaz]

If you have a 20% deposit you can spend a fair bit more than $375k on the actual house. The figures quoted in the original article are the amounts you would need to earn to buy a house with a 20% deposit, so for the $420k quoted above you would actually have a mortgage of around $336k with a 20% deposit. And you certainly do not need an income of $150k to live comfortably with a mortgage of this size. Our mortgage was $375k, not the house price, and we earn less than $150k and live very comfortably. With a 20% deposit on a mortgage of $375k you could afford a house for around $450k. Not sure if you could buy a house worth living in here in Rostrevor but there are plenty of very nice suburbs just a bit further north/North East of here where $450k would get you a very nice house.

 

Not entirely sure why you've added this to my post, as I completely agree, or how we ended up in Rostrevor. I'll have to assume you skip read what I said. I'll repeat, if we wished to buy our current rental in our current suburb and live a comfortable lifestyle, our household income would need to be $150k per annum. To finish I'll add the words a friend added after a recent meeting led to our $150k conclusion, the words are 'at least'.

[NicF]

Not entirely sure why you've added this to my post, as I completely agree, or how we ended up in Rostrevor. I'll have to assume you skip read what I said. I'll repeat, if we wished to buy our current rental in our current suburb and live a comfortable lifestyle, our household income would need to be $150k per annum. To finish I'll add the words a friend added after a recent meeting led to our $150k conclusion, the words are 'at least'.

 

Because in your initial post you implied that a mortgage of $375 would only buy a house in a dodgy area and that you need to be earning at least $150k a year to purchase a house in an area worth living in which simply isn't true. With a 20% deposit, which many migrants moving over will have, a $375k mortgage will buy you a nice house in a nice area. I can't comment on your claim about needing to earn $150K to buy the house you are currently living in as you haven't said where it is or what it is worth. I mentioned Rostrevor as that is where we have a house with a $375k mortgage and where we rented for $420 a week.

[keldaz]

Because in your initial post you implied that a mortgage of $375 would only buy a house in a dodgy area and that you need to be earning at least $150k a year to purchase a house in an area worth living in which simply isn't true. With a 20% deposit, which many migrants moving over will have, a $375k mortgage will buy you a nice house in a nice area. I can't comment on your claim about needing to earn $150K to buy the house you are currently living in as you haven't said where it is or what it is worth. I mentioned Rostrevor as that is where we have a house with a $375k mortgage and where we rented for $420 a week.

 

Ok I've just read my original post again, I can see where your coming from with a touch of conspiracy theory thrown in. We wouldn't live there personally would have more to do with lifestyle and location, an area worth living in is an a personal choice for everyone with no definitive answer. Just to finish off I don't imply, I say what I see straight out.

[NicF]

Ok I've just read my original post again, I can see where your coming from with a touch of conspiracy theory thrown in. We wouldn't live there personally would have more to do with lifestyle and location, an area worth living in is an a personal choice for everyone with no definitive answer. Just to finish off I don't imply, I say what I see straight out.

 

You wouldn't live where personally?

[deryans]

You wouldn't live where personally?

 

 

There are plenty of places that would prove unsuitable for a family , and considering the economic outlook I'd be very careful of getting a bargain as has been implied by other posters.

 

Let me declare my vested interest in this topic : No sugar coating on the truth of our experiences, others it would seem appear to want to make Adelaide significantly more affordable and sustainable than it actually is.

 

I shan't go into the unconcious bias or the stereotyping that blights certain suburbs nor the spruiking of certain burbs by the media, but we all do it to some extent and so does the market, 375K gets you a small courtyard house with no garden in most of the "aspirational" suburbs, and despite what certain posters with vested interests in real estate say, there is a significant risk based on the current economic climate and the historical and future leadership decisions in SA.

 

Sure, 375K gets you a house out of the city which on the face of it may provide the lifestyle you require, and that maybe fine if you find work there, but if you work in the CBD ?...... Limited.

[snifter]

 

I shan't go into the unconcious bias or the stereotyping that blights certain suburbs nor the spruiking of certain burbs by the media, but we all do it to some extent and so does the market, 375K gets you a small courtyard house with no garden in most of the "aspirational" suburbs, and despite what certain posters with vested interests in real estate say, there is a significant risk based on the current economic climate and the historical and future leadership decisions in SA.

 

Sure, 375K gets you a house out of the city which on the face of it may provide the lifestyle you require, and that maybe fine if you find work there, but if you work in the CBD ?...... Limited.

 

375K would have got us squat in the suburbs we were looking at originally. Alas its one of those now medium density zoned areas and a house on a decent block gets bulldozed and 2,3 or even 4 houses get squished on and sold for 500K apiece. Horrible houses IMHO and we looked at a few and said no way and went further afield.

[keldaz]

You wouldn't live where personally?

 

I'm not about to start daubing black crosses on doors, but lets just say I wouldn't let my heart overrule my brain. Houses are generally cheaper in poor social and economic area's, or unsustainable in the longer term due to distance. Making a decision on a lovely sunny day gazing at wonderful view is one thing, once the view has turned to wallpaper, it's p$%*ing with rain, and you have a long commute for the next 25 years, things change. But hey, if your game, knock yourself out.