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

Potential home buyers relying on their income alone would be hard-pressed to buy a house or unit in Sydney as sky-high property prices push the Australian Dream further out of reach.

Sydneysiders would need a six-figure income to afford a home in almost any pocket of the city, new Canstar modelling shows.

In Sydney’s eastern suburbs, a couple would need a salary of $308,000 each to afford the repayments on a $3.7 million house – the median price in the region in the June quarter on Domain data.

In the North Sydney and Hornsby region, couples would need pay packets of $238,000 each to afford repayments on the median house price of $2.92 million.

On the northern beaches, couples would need to earn $206,000 a year each to afford the median house price of $2.57 million.

Couples in seven other regions of Sydney would still need to earn well above $100,000 each to afford the median house price.

The modelling assumes an average variable rate of 6.28 per cent over 30 years and a 20 per cent deposit.

Single buyers face slim pickings, and they could only afford the median unit in south-west or outer south-west Sydney with an income around the average national income of $100,017 on the latest ABS data.

Canstar’s data insights director Sally Tindall said the figures were astronomical.

“Those that don’t have their foot on the property ladder are watching their dreams shift further away,” she said.

Without equity already up their sleeve, Tindall said it’s unlikely a buyer will be able to afford a premium house in a premium suburb with just a 20 per cent deposit or less.

“Those that have already benefitted from property price gains by selling and then buying are really the only ones able to entertain the idea of living in regions such as the eastern suburbs,” she said.

Tindall said buyers are going to all lengths to increase their borrowing power to secure the great Australian Dream of a patch of grass, including relocating to a different state or asking for a pay rise.

Some buyers are receiving help from family, such as a cash gift, an inheritance, or parents offering to act as guarantor so buyers can avoid paying lenders’ mortgage insurance, she said. Others try rentvesting, renting in the suburb where they want to live and buying an investment property elsewhere.

Tindall warned buyers against taking a second job to service a loan without great consideration.

“You don’t want to finally get into the home of your dreams only to find a few years down the track that you just can’t afford it,” she said.

“Don’t think you might be able to quit once the home loan is settled because you’re going to have to keep paying that mortgage.

“You cannot rely on interest rate cuts. Be careful about what you’re committing to and how long for.”

Sydney home buyers need high incomes or another source of help.Credit: Dion Georgopoulos

University of Melbourne economics senior lecturer Dr Lawrence Uren thought even changing careers may not increase buyers’ chances significantly.

“I think it’s more likely buyers will delay the purchase of their first home or forgo other expenses,” he said.

Uren said that some Australians will be completely excluded from home ownership.

“There’s always been an active rental market in Australia and the size of that market is increasing,” he said. “For some, they may be able to purchase a unit or townhouse as opposed to a freestanding home with a large backyard.”

Rashida Lowe and her husband Abel Hawkins sold their Leichhardt terrace in July, upsizing to a five-bedroom family home in Thornleigh.Credit: James Brickwood

Rashida Lowe and her husband Abel Hawkins sold their three-bedroom terrace in Leichhardt in the inner west in July, upsizing to a five-bedroom home with a pool and backyard in Thornleigh in the upper north shore.

Lowe and Hawkins, who share three-year-old twins, work in leadership development and financial services respectively. Lowe first bought a unit with her brother in her 20s, then she and Hawkins bought a unit together before upgrading to the terrace.

Lowe and Hawkins considered staying in the inner west but settled on the upper north shore.

“We looked at the option of extending or adding another bathroom, but it was not feasible as it’s such a small block of land,” Lowe said.

“Anything in the budget was a knockdown and rebuild or had dated furnishings. We now have a modern five-bedroom house on a flat block of land.”

The couple’s selling agent John Cannizzaro of Montano Group sold a 200-square-metre home in the inner west last year for another young family who upsized to a 1200-square-metre house on the upper north shore.

“As the family grows, they are naturally drawn to bigger homes outside of the area,” Cannizzaro said.

“However, there are some that can afford a three-bedroom home in the inner west around that $2 million range.”