How much do you need to earn to afford a house or unit in your capital city?
20 Mar 2023
Find out how much you need to earn to afford a house or unit in your capital city without suffering mortgage stress. Plus, how long will it take you to save a 20% deposit?
It’s been an interesting few years for the property market. National dwelling values rose 28.6% from September 2020 to April 2022, according to CoreLogic, but the rapid rise in the cash rate quickly put a stop to the upward trajectory. Dwelling values fell by 9.1% from April 2022 through to the end of February, which CoreLogic described as “the largest and fastest downswing on record”.
Despite the recent volatility, CoreLogic figures show that home values are still 14.8% higher than where they were in March 2020 at the onset of the pandemic. Add in the fact that the cash rate has increased from 0.10% to 3.60% in just 10 months, and it’s no surprise that affordability still remains an issue.
With that in mind, we decided to take a look at how much you need to earn to afford a house or unit in each capital city without being under ‘mortgage stress’. Keep in mind, this is based on current interest rates. If rates increase again, which experts are predicting they will, you will need some more wiggle room.
The hypothetical scenarios assume you have saved a 20% deposit, so we asked the research team to figure out how long it would take you to save a deposit for a house or unit in each capital city. Keep in mind that there are other upfront costs you’ll also need to cover.
How much do you need to earn to afford a house in your capital city?
Canstar crunched the numbers to reveal how much you need to earn to be able to afford the repayments on a house in each capital city without suffering mortgage stress. This is based on the median house value and assumes you have a 20% deposit and that your annual mortgage repayments make up 29.99% of before-tax income.
The numbers show that Sydneysiders need to earn the most – $238,399 – to be able to comfortably afford the repayments on a house based on the median value. Those who want to buy a home in Perth or Darwin need to earn just under $115,000 to avoid mortgage stress – roughly half of what those in Sydney need.
Annual income needed to afford a house in each capital city
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| Capital City | Median property value | Deposit (20%) | Monthly repayment | Average annual before-tax income | Before-tax income required to avoid mortgage stress | Difference |
|---|---|---|---|---|---|---|
| Sydney | $1,217,308 | $243,462 | $5,958 | $94,130 | $238,399 | -$144,269 |
| Melbourne | $897,222 | $179,444 | $4,392 | $93,283 | $175,739 | -$82,456 |
| Brisbane | $767,781 | $153,556 | $3,758 | $91,556 | $150,370 | -$58,814 |
| Adelaide | $694,653 | $138,931 | $3,400 | $86,216 | $136,045 | -$49,829 |
| Perth | $587,274 | $117,455 | $2,874 | $103,402 | $114,998 | -$11,596 |
| Hobart | $699,959 | $139,992 | $3,426 | $82,493 | $137,086 | -$54,593 |
| Darwin | $585,836 | $117,167 | $2,867 | $90,693 | $114,718 | -$24,025 |
| Canberra | $946,022 | $189,204 | $4,630 | $104,993 | $185,262 | -$80,269 |
| Combined Capitals | $848,706 | $169,741 | $4,154 | $94,000 | $166,215 | -$72,215 |
Source: www.canstar.com.au. Prepared on 8/03/2023. Median Property Value based on the CoreLogic Home Value Index as at 28 February 2023 statistics. Monthly repayment assumes principal & interest repayments made over 30 years, based on the average owner occupier variable rate of 5.94% plus the March 2023 cash rate increase (based on loans available for $500,000, 80% LVR and principal & interest repayments in Canstar’s database; excludes introductory and first home buyer only home loans). Average Gross Income based on ABS Average Weekly Earnings November 2022 (full-time, adult, ordinary time earnings).
How much do you need to earn to afford a unit in your capital city?
The table below shows how much you need to earn to be able to afford the repayments on a unit in each capital city without suffering mortgage stress. This is based on the median unit value and assumes you have a 20% deposit and that your annual mortgage repayments make up 29.99% of before-tax income.
Once again, those living in Sydney need to earn the most ($150,770) to avoid mortgage stress while those in Darwin need to earn the least ($73,505).
Annual income needed to afford a unit in each capital city
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| Capital City | Median property value | Deposit (20%) | Monthly repayment | Average annual before-tax income | Before-tax income required to avoid mortgage stress | Difference |
|---|---|---|---|---|---|---|
| Sydney | $769,773 | $153,955 | $3,768 | $94,130 | $150,770 | -$56,640 |
| Melbourne | $585,366 | $117,073 | $2,865 | $93,283 | $114,638 | -$21,355 |
| Brisbane | $490,997 | $98,199 | $2,403 | $91,556 | $96,152 | -$4,596 |
| Adelaide | $436,567 | $87,313 | $2,137 | $86,216 | $85,509 | $707 |
| Perth | $406,225 | $81,245 | $1,988 | $103,402 | $79,547 | $23,855 |
| Hobart | $526,037 | $105,207 | $2,575 | $82,493 | $103,034 | -$20,541 |
| Darwin | $375,349 | $75,070 | $1,837 | $90,693 | $73,505 | $17,188 |
| Canberra | $596,564 | $119,313 | $2,920 | $104,993 | $116,839 | -$11,846 |
| Combined Capitals | $607,545 | $121,509 | $2,974 | $94,000 | $119,000 | -$25,000 |
Source: www.canstar.com.au. Prepared on 8/03/2023. Median Property Value based on the CoreLogic Home Value Index as at 28 February 2023 statistics. Monthly repayment assumes principal & interest repayments made over 30 years, based on the average owner occupier variable rate of 5.94% plus the March 2023 cash rate increase (based on loans available for $500,000, 80% LVR and principal & interest repayments in Canstar’s database; excludes introductory and first home buyer only home loans). Average Gross Income based on ABS Average Weekly Earnings November 2022 (full-time, adult, ordinary time earnings).
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How long will it take you to save a 20% deposit for a house in your capital city?
One of the hardest parts of getting your foot on the property ladder is saving the deposit. The Canstar research team calculated how long it would take to save a 20% deposit in each capital city. This is based on the median house value as at February 2023. It assumes you earn the average weekly earnings for each respective state and that you save 20% of your after-tax income.
As the table shows, it would take you more than 12 years in five of the eight capital cities to save a 20% deposit but if there were two of you that time could be shaved down a fair bit. In Melbourne, for example, it would take someone on a single income 14 years and four months but if they pooled their savings with someone else, they could potentially reach their goal in six years and nine months.
Time to save a 20% deposit for a house in each capital city
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| Capital City | Median property value | Estimated time to save | |
|---|---|---|---|
| Single income | Dual income | ||
| Sydney | $1,217,308 | 20 yrs & 4 mths | 9 yrs & 3 mths |
| Melbourne | $897,222 | 14 yrs & 4 mths | 6 yrs & 9 mths |
| Brisbane | $767,781 | 12 yrs & 3 mths | 5 yrs & 10 mths |
| Adelaide | $694,653 | 11 yrs & 7 mths | 5 yrs & 7 mths |
| Perth | $587,274 | 8 yrs & 2 mths | 4 yrs |
| Hobart | $699,959 | 12 yrs & 3 mths | 5 yrs & 10 mths |
| Darwin | $585,836 | 9 yrs & 2 mths | 4 yrs & 5 mths |
| Canberra | $946,022 | 13 yrs & 7 mths | 6 yrs & 5 mths |
| Combined Capitals | $848,706 | 13 yrs & 4 mths | 6 yrs & 4 mths |
Source: www.canstar.com.au. Prepared on 8/03/2023. Median Property Value based on the CoreLogic Home Value Index as at 28 February 2023 statistics. Estimated time taken to save a 20% deposit based on the following assumptions: Starting income based on the average weekly earnings for each respective state (ABS Average Weekly Earnings; November 2022; full-time adult ordinary time earnings), wage growth of 2.50% p.a., property price growth of 2.50% p.a., 20% of after-tax income deposited into a savings accounts with an interest rate of 1.53% (average bonus saver rate over the past 5 years, based on calculating average each month), and interest earnings at the relevant marginal tax rate (based on the 2022-23 financial year) plus the 2% Medicare Levy. For the dual income scenario, earnings are assumed deposited into a joint savings account.
How long will it take you to save a 20% deposit for a unit in your capital city?
Canstar worked out how long it would take to save a 20% deposit for a unit in each capital city. This is based on the median unit value as at February 2023. It assumes you earn the average weekly earnings for each respective state and that you save 20% of your after-tax income.
The table below shows that it ranges from five years and six months to 12 years assuming a single income. You can get there faster if there are two of you saving.
Time to save a 20% deposit for a unit in each capital city
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| Capital City | Median property value | Estimated time to save | |
|---|---|---|---|
| Single income | Dual income | ||
| Sydney | $769,773 | 12 yrs | 5 yrs & 8 mths |
| Melbourne | $585,366 | 8 yrs & 11 mths | 4 yrs & 4 mths |
| Brisbane | $490,997 | 7 yrs & 7 mths | 3 yrs & 8 mths |
| Adelaide | $436,567 | 7 yrs & 1 mth | 3 yrs & 5 mths |
| Perth | $406,225 | 5 yrs & 6 mths | 2 yrs & 9 mths |
| Hobart | $526,037 | 8 yrs & 11 mths | 4 yrs & 4 mths |
| Darwin | $375,349 | 5 yrs & 9 mths | 2 yrs & 10 mths |
| Canberra | $596,564 | 8 yrs & 2 mths | 4 yrs |
| Combined Capitals | $607,545 | 9 yrs & 3 mths | 4 yrs & 6 mths |
Source: www.canstar.com.au. Prepared on 8/03/2023. Median Property Value based on the CoreLogic Home Value Index as at 28 February 2023 statistics. Estimated time taken to save a 20% deposit based on the following assumptions: Starting income based on the average weekly earnings for each respective state (ABS Average Weekly Earnings; November 2022; full-time adult ordinary time earnings), wage growth of 2.50% p.a., property price growth of 2.50% p.a., 20% of after-tax income deposited into a savings accounts with an interest rate of 1.53% (average bonus saver rate over the past 5 years, based on calculating average each month), and interest earnings at the relevant marginal tax rate (based on the 2022-23 financial year) plus the 2% Medicare Levy. For the dual income scenario, earnings are assumed deposited into a joint savings account.
Cover image source: JodieWangss/Shutterstock.com
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This article was reviewed by our Editorial Campaigns Manager Maria Bekiaris before it was updated, as part of our fact-checking process.
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