Most FHBs feel housing is unaffordable: study

November 11, 2015

More than 80% of first home buyers who are planning to purchase property within the next two years believe housing is unaffordable in their state.

According to Mortgage Choice's annual First Home Buyer Survey, 80.6% of those purchasing property for the first time consider housing to be ‘unaffordable'.

Mortgage Choice chief executive officer John Flavell said the issue of unaffordable housing was more predominant in certain states.

“The percentage of first home buyers who consider housing to be unaffordable is significantly higher in New South Wales and Victoria than it is in Queensland and South Australia,” he said.

Across the country, first home buyers in New South Wales were the most disillusioned about property prices, with 86.9% of respondents stating housing was unaffordable in their state. Victoria was next with 85.7% of first time buyers saying property was too pricey. Meanwhile, South Australia and Queensland boasted the smallest percentage of disgruntled first home buyers, with 76.8% and 75.4% respectively stating housing was unaffordable in their states.

Mr Flavell said he wasn't surprised to see such a high percentage of first home buyers in New South Wales and Victoria claiming housing is unaffordable.

“Over the last 12 months, dwelling values in the capital cities of New South Wales and Victoria have climbed dramatically. In Sydney, property prices have grown by 15.6%, taking the median dwelling price to $800,000, while in Melbourne, property values have risen by 12.8%, giving the capital city a median dwelling value of $600,000,” he said.

“Meanwhile in the capital cities of Queensland, South Australia and Western Australia, property prices have climbed by far less. In Brisbane for example, property values are up just 3.8% for the 12 months to November.

“But while property price growth in Sydney and Melbourne is outstripping the growth achieved in other capital cities, it is fair to say that housing affordability is a real issue affecting thousands of people all across the country.”

Data from the Australian Bureau of Statistics shows the average home loan has grown almost four times faster than the average Australian full-time wage in the last two years.

According to the data, the average home loan grew by 18.5% in the two years to April 2015 – from $301,800 to $357,500. Meanwhile, the average Australian full time wage grew just 3.6% from $77,225 to $80,054.

As a result, the average home loan size in Australia is now approximately 4.5 times larger than the average wage – up 25% in the last two years. In 2013, the average loan size was 3.9 times the average full-time Australian wage.

“These statistics are worrying as they clearly show wages aren't keep up with property prices,” Mr Flavell said.

“If property price growth continues to outstrip wage growth, how can we expect our children or our children's children to buy property and achieve what many of us consider to be the great Australian dream?”

Mr Flavell said it was time for the government to act and introduce measures that would make it easier for first time buyers to purchase property.

“Our data shows the majority of potential first home buyers would like to see the government re-introduce a grant for established properties,” he said.

“While the various states currently have first home buyer grants in place for those who purchase a newly built property, nothing is given to those buying established properties, which is approximately 80% of all first time buyers.”

According to the survey, 42.5% of respondents said they would like to see the government introduce a first home owner grant for established properties, while a further 30.6% would like to see the government remove stamp duty for first time buyers.

Mr Flavell said now was the perfect time for the government to introduce a new incentive for first time buyers.

“With property prices rising steadily across most markets, a lot of first time buyers are finding themselves priced out of the market. To rectify this problem, the government really needs to act,” he said.

“Now we have a new Prime Minister in place, I would like to see the plight of first time buyers receive the attention it deserves.”