Australia is in the midst of a first home buyer affordability crisis – or so we’re told by our politicians, commentators and other interested parties. While this doom and gloom forecast has some standing in truth, it only paints half the picture. Not every market is experiencing the same set of factors that are feeding spiralling house prices.
So it got us thinking - where is the best place in Australia to buy a home?
We decided to crunch the numbers to find out which state has it easiest when buying a home. Using the main factors that come into play when buying a home, such as average income, median house prices and government grants and assistance available, which vary greatly depending on where you live, here’s what we found out.
What we found out
||Average annual income (before tax) for a full-time adult
||Median house price in capital city
||Property price to income ratio
||Housing grants available for new homes
||$10,000 - metropolitan
$20,000 - regional
||Transactions in 2017 may be eligible for $5,000 + $10,000
||$20,000 until July 1 2017, $10,000 after
||$20,000 June 30 2017, $10,000 after
We’ve all heard about the astronomically high housing prices in Sydney, and they’re certainly a key factor blocking first-time buyers out of the market, with the median house price more than 12 times the average annual income. At the same time, government assistance is limited for first home buyers with a grant of $10,000 available for newly built homes.
This places Sydney at the bottom of the list and makes it the hardest place in Australia for first home buyers to break into the market.
Melbourne has the second highest median house price at just over $720,000 - nearly nine times the average annual income. For metropolitan buyers, there is a $10,000 grant and the newly announced $20,000 for those in regional areas.
Other new measures recently announced by the Victorian Government to assist home buyers include scrapping stamp duty for home purchases under $600,000, taxing vacant housing stock and a shared ownership plan witih Government to reduce the deposit required.
While the raft of Government changes should be applauded, until they are in place and we can assess their impact, Melbourne continues to sit towards the bottom of the list as one of the hardest places to buy a home.
In Brisbane, the third eastern states capital, the median house price sits at a much more reasonable $517,229, and with an average annual income of $80,080 it puts the property price to income ratio at 6.5, making it significantly more affordable than Sydney and Melbourne.
Hobart has the lowest median house price at $347,287, but does that mean it’s the best place to buy a home? In this case it does, and with its annual wage being the lowest in the country at $72,696 it equates to housing prices being 4.7 times the annual income, the lowest ratio in the country. A Government grant of $20,000 is also available for newly built homes until 1 July this year.
With a property price to income ratio of 6.2, Adelaide sits only second behind Hobart as the most affordable place in Australia to buy a home. Add to that the assistance available through Government grants and Government-backed lender HomeStart Finance, which provides access to a range of innovative home loan products such as low deposit and shared equity, and there’s a compelling argument for Adelaide to sit at the top of the list as the best place in Australia to buy a home.
Heading west, the median house price in Perth is $587,328 and the annual income at $93,496 - due to well paying fly-in fly-out jobs in the mining sector. This puts the property price to income ratio at 6.3, slightly higher than in South Australia. In Western Australia until July 2017, first-time buyers who buy or build a new home could be eligible for a grant of $15,000.
Along with South Australia, they are also one of only two states with a Government-backed lender, Keystart, which provides first home buyers with better access to home loan finance.
The final word
While Hobart comes in with the lowest price to income ratio, the availability of Government-backed home loans in Adelaide and Perth which help overcome some of the upfront barriers to ownership, combined with relatively low price to income ratios make those two capital cities the best place in Australia if you are a first home buyer.