How much money you need to earn to buy a house in Melbourne

Home buyers need a six-figure annual household income to afford a house in Melbourne, leaving single-income earners struggling to move up the property ladder.

Single-income buyers looking to purchase a house in Melbourne’s inner, inner south and inner east would need an annual income north of $239,000 and a 20 per cent deposit to be able to service a home loan, Canstar data shows.

Couples would need to earn upwards of $114,000 each to purchase a house in the same areas, and as much as $137,000 in the inner east.

Canstar data insights director Sally Tindall said property prices were outpacing wage growth, making it especially difficult for single-income buyers to secure a large enough home loan while rates remain high.

“It’s incredibly tough for singles, in particular, who are buying with just one income,” Tindall said.

“Wages growth isn’t keeping up with property price growth. Pre-rate rises, [borrowing capacity] was tens of thousands, sometimes hundreds of thousands, more than what a person or a couple can borrow today, even when you factor in wages growth.”

Tindall said while it was easier for dual-income households to purchase a standalone home, the cost of property and high interest rates were causing some buyers to turn to a third source of income.

“What we’re finding increasingly is not only people buying with two incomes, but people sometimes buying with three, with the help of mum and dad, whether that’s a cash contribution towards the deposit or guarantor,” she said.

Tindall added that starting off with a unit or apartment made it easier for buyers to maximise their borrowing capacity and work their way up the property ladder.

“They’re either going to sell their home and upgrade from a unit to a house, or they might take out equity from a property that they already have in order to help them come up with a decent deposit,” she said.

Couples opting for a unit could buy on a salary of about $60,000 each in many areas, but single unit buyers would face a steep income threshold north of six figures.

Doug McRostie, 34, and Sarah Messina, 32, recently sold their two-bedroom Cheltenham townhouse and upsized to a four-bedroom house in Mentone they purchased in 2022 when rates were at record lows.

McRostie, a private banker, and Messina, who works in human resources, both received pay rises in the lead up to buying their new home, which helped stretch their borrowing capacity.

“[Pay rises] definitely helped. We wouldn’t have been able to do it without them,” McRostie said. “Because interest rates went so low, it actually was quite viable for what we needed for the property, but if we went through the same thing now, we probably wouldn’t be able to borrow so much.”

Doug McRostie and Sarah Messina have sold their unit in Cheltenham and are upsizing to a house in Mentone.Credit: Eddie Jim

McRostie added that it would have been more difficult to buy a house if they were relying on a single income and if they hadn’t already broken into the property market.

“We saved up a bit of extra money and then got this property revalued to unlock some equity,” he said. “I know how hard it is for a single person to buy property, especially with interest rates where they are.”

Their real estate agent, Ray White Cheltenham director Kevin Chokshi, said dual-income earners were the main house buyers in the bayside area, with single-income households often priced out of standalone dwellings.

“Generally speaking, anyone buying a house in this area, it’s their second or third home,” Chokshi said. “It’s super rare that [first home buyers] are buying a first home as a house in this area.”

Doug McRostie and Sarah Messina wouldn’t have been able to buy a larger home on a single income.Credit: Eddie Jim.

Chokshi said that he had seen couples looking to start families move in with parents after selling units or townhouses to help save a deposit for a larger home.

Partner mortgage broker at Axton Finance Luke Rowland said income was important when it came to applying for a home loan and that pay rises could make a big difference.

“[Buyers] may see a pay rise on the horizon, and that extra 10, 15, 20 thousand can definitely help in terms of boosting your capacity,” he said.

Rowland said some prospective buyers will wait for a pay increase to help increase their borrowing capacity.

With property prices soaring above wages growth, University of Melbourne economics senior lecturer Dr Lawrence Uren said many buyers were making compromises or delaying the purchase of their first home altogether.

“It may mean that instead of purchasing a freestanding home with a large backyard, they’ll be more likely to purchase a unit, apartment or potentially a townhouse,” he said.

“They could move further away from the CBD and that will reduce prices as well.”

With Kristy Johnson