Anyhow, lets look at the current situation:
Average weekly full-time ordinary time weekly pay for a person in NSW (as at May '08) is $1,142.50. According the the St George bank online mortgage estimator, a single person on that weekly income (using the default settings of having average living expenses of $14,568 pa plus a 350/month car loan) would qualify to borrow up to $367,000 on a standard 30-year variable rate home loan. In my experience St George uses fairly typical repayment:income limits (typical of 'old school' banking). So a person on AVERAGE income in NSW could easily 'afford' to buy a house in one of the cheaper suburbs. For example, median (ie. half the houses sold for LESS than this amount) house prices for the 6 months to Sep '09 for some example suburbs are:
Mt Druitt $277,000
St Marys $284,000
I wouldn't choose to live in one of these suburbs, but they're OK (my sister lived in St Marys for a while and I owned a rental property in Blackett for about ten years).
Some commentators are even going so far as to state that houses are 'out of reach' for a couple where BOTH people work full-time! In that case, AVERAGE male full-time OTE weekly income is $1,213.00 and for a female full-time worker OTE weekly income is $1,026.90, giving a combine income of $2,239.90. According to St George, that couple could borrow up to $853,000 putting a whole swag of the most expensive Sydney suburbs within reach (if they had saved up a 20% deposit):
It appears that only houses in the MOST expensive suburbs would actually be 'out of reach' for a couple with both earning AVERAGE income:
Hunters Hill $1,495,000
I think a lot of the people that are complaining about housing affordability (and hoping that house prices will drop 30%-40% before they buy) are simply unwilling to make the life-style spending sacrifices (eg. no eating out, taking staycations for a couple of years) required to be able switch from being renters to being home owners. In five years time I expect both house prices and rents will be higher than now -- and the same people will still be waiting for house prices to drop to more 'affordable' levels.
What do you think?
ps. Don't forget that home loan interest rates are now lower than at any time since the early 60s. Would you prefer current prices and home loan interest rates around 8%, or home prices 50% lower and interest rates of 17%?
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