Aussies need at least $160k salary to buy a home in most Sydney and Melbourne suburbs

Real estate prices in Australia may be coming down but you still might not be earning enough to get onto the property ladder.

House hunters in Sydney need the salary of a paediatrician or a member of parliament just to afford a detached home at the lower end of the property market, new data shows.

Canstar analysis says those hoping to buy a median priced house worth about $1 million need to be on an individual wage of $160,611, considering the borrower pays a 20 per cent deposit upfront.

This equates to earning the pay packet of a paediatrician ($179,250) or an MP ($184,840) just to avoid mortgage stress, according to 2015/16 figures from the Australian Bureau of Statistics.

In Melbourne, where realestate.com.au calculates the median cost of a home is $737,000, homeowners need to earn in excess of $112,300 just to live comfortably while paying off a mortgage.

The average annual income is about $82,400, according to the Australian Bureau of Statistics, which means on a single salary the regular Aussie would struggle to own a home worth much more than $500,000.

Although prices in the two major cities continue to decline, realestate.com.au chief economist Nerida Conisbee says house hunters would be hard-pressed finding a home near the $1 million mark in a popular Sydney suburb.

She said even Camben Park, which is nearly a 70 kilometre drive from Sydney’s city centre, has recently joined the $1 million club.

“For $1 million you’re not buying the best of the best in Sydney, you’re buying something that would be considered a first home buyers suburb,” Ms Conisbee told news.com.au.

Canstar’s home loan expert, Steve Mickenbecker, says the “rule of thumb” is homeowners will be stressed with repayments above 30 per cent of their pre-tax income.

“If buyers jump early and get finance with a 10 per cent deposit, repayments will climb and may lead to mortgage stress,” he said.

“Not too many first home buyers enter the market with a $165,000 salary.”

Mr Mickenbecker said those looking to buy, considering the continual fall in Melbourne and Sydney prices, should resist jumping into debt and spend a year or so getting their finances in order.

“If you think back to 18 months to two years ago, there was downright panic to try and get into the market,” he said.

“You hear the anecdotes all the time where some young person had gone to the auction, had been the last one standing, dropped out, only to go to another auction a month later to find out the number they dropped out on then has been left behind.”

The loan expert said potential buyers now have the luxury to ensure they can save extra for a deposit and therefore borrow less.

Prices in capital cities outside of the major cities are more optimistic for first home buyers, said Ms Conisbee, but centralised industries make it difficult for a large portion of professionals to live elsewhere.

She said this has created a trend of Australians continuing to rent in the expensive cities while snapping up property in cheaper spots.

“You may look at Adelaide house prices but you can’t realistically move there,” she said.

“It does lead to a lot of people, particularly younger people, in Sydney rentvesting, so buying elsewhere in Australia when they look to buy.”

Ms Conisbee’s advice to house hunters echoes that of Mr Mickenbecker: “Take your time,” she said. “There’s certainly no rush to buy housing in Sydney at the moment.

“The prices aren’t really going anywhere and if you do want to buy and you find the right home, it does give you more negotiating power and it does give you a better house for your money.”

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Originally published as Aussies need at least $160k salary to buy a home in most Sydney and Melbourne suburbs