Australia has been listed as one of the top travel destinations in 2015 by TripAdvisor, Lonely Planet and National Geographic, and you or your clients might be thinking of taking a trip or even investing down under.
We’ve crunched the numbers to see how affordable Australian property is and the annual salary needed to purchase the median-priced home in each of Australia’s capital cities, as well as in several inner-city suburbs. The results might surprise you.
If you’re a foreign resident, be careful
Australia has quite a strict foreign investment policy. Nonresident foreigners cannot buy established dwellings as investment properties in Australia, other than in exceptional circumstances.
The purchase of new dwellings is generally allowed, as it contributes to Australia’s housing stock and local employment. However, an application to the Australian Foreign Investment Review Board (FIRB) is required. A no-approval, no-purchase policy exists, and the FIRB’s prior consent is required for the purchase to be legal.
Temporary residents can buy one established dwelling if it is used as their residence while in Australia. It must be sold within three months if the temporary resident leaves the country.
Before talking to an Australian real estate agent, consider the recently updated Australian Foreign Investment Policy.
Introductions to Australian real estate agents
As there is no MLS in Australia, the best way to locate a property is through the two dominant property portals, realestate.com.au and domain.com.au, and then approaching the selling agent directly.
Generally, Australian agents are prohibited from sharing any of their commission with someone who is not also a licensed agent, as defined by the respective acts. Australian agents operate under specific state-based regulations, which vary slightly.
So what does it cost?
Our research suggests homebuyers need an annual salary of $73,500 ($53,000 USD) to buy the median-priced home in Australia. This is broadly comparable to the salary of $48,604 USD required to buy the median-priced home in the U.S.
It is also in line with Australian Bureau of Statistics data that shows the average Australian earns just under $80,000 each year, though this figure is heavily skewed by a small number of high-income earners.
While the national median house price and the average Australian annual earnings seem to add up, there’s a problem: The national median house price does not accurately reflect how much it costs to buy in some of Australia’s most in-demand locations.
As you can see from the map below, the annual salary needed to purchase a median-priced home varies from city to city.
The map shows, for example, that the average homebuyer has been all but pushed out of Sydney’s property market, with a six-figure income required.
Australia’s most affordable capital cities
Now let’s review the affordability of Australia’s capital cities.
Hobart, Adelaide, Brisbane and Perth are the most affordable Australian capital cities for homebuyers.
To purchase the median-priced homes in these cities, homebuyers need an annual salary of less than $66,500. If you’re interested in moving to Hobart, Tasmania, recently named one of the world’s top 10 regions, then the average annual salary required is relatively affordable at $49,000.
Hobart
Median house price: $347,000
Salary required: $49,000
Adelaide
Median house price: $430,000
Salary required: $57,100
Brisbane
Median house price: $487,000
Salary required: $62,900
Perth
Median house price: $525,000
Salary required: $66,500
Melbourne, Canberra and Darwin more expensive
Unfortunately, not all Australian capital cities are as affordable as Hobart.
As you might expect, Canberra and Melbourne are at the higher end of the scale, with median-priced homes in these cities requiring annual salaries of $73,300 and $75,400, respectively.
Darwin, propelled by large-scale mining and infrastructure projects, isn’t far behind. Homebuyers need an annual salary of $72,500 to buy in Australia’s most northern city.
Darwin
Median house price: $585,000
Salary required: $72,500
Canberra
Median house price: $590,000
Salary required: $73,300
Melbourne
Median house price: $615,000
Salary required: $75,400
Sydney — if you’re not on a six-figure salary, look elsewhere
With houses regularly selling for over $1 million, it will surprise few that Sydney has some of the least affordable homes in the country.
Homebuyers need to earn at least $106,000 to afford Sydney’s median priced home — and a lot more if they want to buy in more prestigious suburbs.
Sydney
Median house price: $900,000
Salary required: $106,000
Pay extra for top locations
You already need a six-figure salary to afford the median-priced home in Sydney. But if you thought that was out of reach for most Australians, wait until you hear how much it costs to buy in the inner city.
Melbourne homebuyers need to be in the second-highest tax bracket or above (earning at least $138,200 per year) to afford the median-priced home in inner city suburbs such as Fitzroy.
In Sydney, homebuyers need an annual salary of $235,000 — or over three times the average annual Australian wage — to afford to buy the median-priced home in Bondi Beach.
And that’s not the worst of it.
Prospective homeowners need an annual salary of $1,169,000 – over 15 times the average salary – to afford the median-priced home in Point Piper.
To put that into perspective, fewer than 0.1 percent of Australians make more than $1,169,000 per year. In fact, someone at the lower end of Australia’s top 0.1 percent earns just $600,625. That’s over $550,000 short of what’s required to afford for the median-priced Point Piper home.
Australia’s priciest hipster suburbs
9. Redfern, NSW
Median price: $1.18 million
Salary required: $135,200
8. Forest Lodge, NSW
Median price: $1.181 million
Salary required: $135,200
7. Fitzroy, VIC
Median price: $1.206 million
Salary required: $138,200
6. Camperdown, NSW
Median price: $1.26 million
Salary required: $143,900
5. Surry Hills, NSW
Median price: $1.33 million
Salary required: $152,500
4. Chippendale, NSW
Median price: $1.33 million
Salary required: $152,000
3. Darlinghurst, NSW
Median price: $1.43 million
Salary required: $162,000
2. Bondi Beach, NSW
Median price: $2.002 million
Salary required: $235,000
1. Point Piper, NSW
Median price: $9.4 million
Salary required: $1,169,000
Leoboudv / Wikimedia Commons
How affordability was calculated
Calculations assume that a homebuyer:
- Is single.
- Has no dependents.
- Puts down a 20 percent deposit on a 25-year loan at an interest rate of 5 percent (plus a buffer of 1.5 percent).
- Has annual expenses equal to $17,907, which is the Melbourne Institute’s definition of the poverty line.
- Devotes all after-tax income (beyond the $17,907) to loan repayments.
We then researched median capital city and suburb house prices using CoreLogic and realestate.com.au data, and used an online borrowing calculator to determine how much a buyer would need to borrow to purchase the median-priced home in each location.
Thomas Roberts is the CEO and founder of Which Real Estate Agent, an Australia-based real estate agent comparison service. You can follow him on Twitter or LinkedIn.