Housing affordability remains a critical concern across Australia, as highlighted in the ANZ CoreLogic Housing Affordability Report - November 2024. Rising home values, stagnant income growth, and increasing rental costs have created significant challenges for prospective buyers and renters alike. This comprehensive blog combines insights into national trends and Melbourne’s unique position in the housing market, offering a detailed analysis for our Core Elite Real Estate audience.
A Snapshot of 2024
The past year has seen housing affordability metrics deteriorate nationwide, with affordability challenges becoming more pronounced in several capital cities. Key national statistics include:
• Median Dwelling Value: $807,000, an 8.5% increase from the previous year.
• Median Weekly Rent: $642, up 9.6% from 2023.
• Median Gross Household Income: $101,000 annually, rising by just 2.8%.
Homeownership: A Steeper Climb
The report reveals the growing difficulty of purchasing a home in Australia:
• Dwelling Value-to-Income Ratio: The national median ratio reached 8.0, well above the 20-year average of 6.7.
• Years to Save for a Deposit: A median-income household now requires 10.6 years to save for a 20% deposit, assuming a 15% savings rate.
• Mortgage Affordability: More than 50.6% of household income is needed to service a new mortgage, a record high.
Rental Pressures Intensify
Renters are also feeling the squeeze:
• Median Rent Burden: Households now spend 33% of their gross income on rent, marking a new high.
• Cities like Adelaide lead the affordability crisis, with renters spending 34.6% of income on housing.
Melbourne’s Property Market: A Mixed Bag
Melbourne’s housing market has seen significant changes over the years, offering a unique mix of challenges and opportunities. Once among the most expensive cities, Melbourne has experienced price softening, making it comparatively more accessible than Sydney or Brisbane.
1. Median Dwelling Values:
• Melbourne’s median dwelling value is $779,000, positioning it as the sixth-most expensive city in Australia.
• In comparison, Sydney leads with a median value of $1,193,000, followed by Brisbane at $883,000 and Adelaide at $809,000.
2. Affordability Metrics:
• Dwelling Value-to-Income Ratio: Melbourne’s ratio of 7.0 is below Sydney’s 9.8 but above Canberra’s 6.1, reflecting a middle ground among capital cities.
• Years to Save a Deposit: At 9.7 years, Melbourne offers an edge over Sydney (13 years) and Adelaide (12 years).
3. Rental Market:
• Melbourne renters spend 31.6% of household income on average, slightly below Sydney (33.3%) and Adelaide (34.6%).
4. Market Trends:
• Melbourne’s property values have declined by 5.1% since their peak in March 2022, making it more affordable for buyers compared to other capitals.
• Rental affordability remains a challenge, as demand for housing continues to rise.
Comparisons Across Cities
The challenges of housing affordability vary widely between Australian cities:
• Sydney: The least affordable city, with a 62.1% income requirement for mortgage repayments and 33.3% for rent. Saving for a deposit takes the longest at 13 years.
• Brisbane and Adelaide: Both cities have experienced rapid price growth due to lifestyle changes and migration. However, this growth has significantly eroded affordability.
• Perth and Darwin: These cities remain among the most affordable, with Perth requiring less than 10 years to save for a deposit and Darwin being the cheapest rental market.
• Canberra: Known for its relative stability, Canberra is the second-most affordable city for buyers, with mortgage payments requiring 38.6% of income.
• Hobart: Affordability has improved in Hobart due to declining property values, although rents remain high.
Future Outlook
While modest improvements in affordability are expected in 2025, challenges persist:
• Interest Rates: ANZ predicts a reduction in the cash rate by 75 basis points by late 2025, potentially easing mortgage serviceability costs.
• Supply Constraints: Without significant increases in housing supply, any gains in affordability could be short-lived, as renewed demand pressures may drive prices higher.
Opportunities in Melbourne’s Market
Despite challenges, Melbourne’s property market offers unique advantages for buyers and investors:
• Price Declines: Melbourne’s softened prices present a relative bargain compared to cities like Sydney and Brisbane.
• Diverse Housing Options: From affordable units to high-end homes, Melbourne caters to various needs and budgets.
• Growth Potential: As migration rebounds and interest rates stabilize, Melbourne is poised for long-term recovery.
Australia’s housing affordability crisis continues to deepen, with Melbourne presenting both challenges and opportunities. While affordability remains a concern, the city’s relative accessibility and growth potential make it a compelling option for buyers and investors.
Disclaimer
The content of this blog is based on the ANZ CoreLogic Housing Affordability Report - November 2024 and general market observations. It is intended for informational purposes only and should not be considered as financial, legal, or real estate advice. Market conditions are subject to change, and readers are encouraged to seek professional guidance tailored to their specific circumstances before making property-related decisions.
