Homebuyers now need to spend up to 140 years paying off a home – Htag

Homebuyers now need to spend up to 140 years paying off a home – Htag
It now takes a typical Australian family 140 years to pay off a home loan.

The rapid increase in property prices over the past decade has now led to homes in certain suburbs that will take borrowers up to 140 years to pay off based on their current income levels.

New research from proptech platform, HtAG Analytics, has found that housing affordability has continued to decline with the number of years it takes to pay off and own a property in cities like Sydney and Melbourne ballooning to extremely unaffordable levels.

HtAG analysed the “years to own” metric, a measure of property affordability, to estimate the number of years it would take for a homebuyer to fully repay their home loan based on median home prices and median family income levels.

This is based on a standard 30-year mortgage term at current interest rates and assumes that households contribute 50% of their wages to mortgage repayments. A higher “years to own” value indicates lower affordability, with values above 30 years signalling a concerning threshold as it suggests that borrowing capacity is exceeded.

Strathfield, in New South Wales, was found to be the most unaffordable location to own a house in the country with home buyers forced to spend the next 144 years paying down a typical mortgage, based on the suburb’s median household income.

Gerroa (134 years)and Chinderah (124 years) all in NSW also had extremely high years to own levels.

While Sunshine Beach in Queensland at 120 years was the Sunshine State’s least affordable housing market and Balwyn was Victoria’s most unaffordable location at 110 years.

For units, Soldiers Point in NSW (82 years), Noosa Heads and QLD (75 years) and Byron Bay in NSW (74 years) proved to be the most unaffordable markets.

New South Wales was found to be the country’s most unaffordable housing market, taking on average 42 years to pay off a free-standing house based on the median family income.

Victoria was second at 39 years, Tasmania third at 38 years. All the major capital cities required a mortgage holder to spend 25 to 30 years paying off a mortgage.

The most affordable properties in the country were found in regional areas, with units in Mt Isa in Queensland, only needing 3.5 years to pay off, followed by houses in Morowa in WA (4.4 years) and Kambalda East also in WA (5.19 years).

HtAG Analytics co-founder, Alex Fedoseev said Sydney and Melbourne property markets have now reached an unaffordable level compared to the rest of the country.

“In states like South Australia and Queensland, the gap between owning a house and a unit is relatively smaller, indicating a more balanced property market,” Mr Fedoseev said.

“In contrast, New South Wales and Victoria exhibit a larger disparity, demonstrating the dominance of higher-priced houses in those markets.”

Mr Fedoseev said that two common factors contribute to the consistent unaffordability of suburbs with years to own above 100 – high house prices coupled with a prevalence of renters or exclusive locations with generational wealth.

“In these markets, a significant portion of the population is engaged in renting units rather than owning a house,” he said.

“While the majority of household incomes in these suburbs may suffice for renting or owning a unit, they may not be adequate for purchasing houses.

“This leads to a property market that primarily supports rental properties in units and maintains high house prices.”

He said that prime suburbs situated near the water or in upscale locations attract a population with well-established, generational wealth.

“In these areas, wealth often outpaces wage and income growth for the general population, he said.

“The high demand for premium real estate from affluent residents drives up prices, making it challenging for individuals with lower or average incomes to afford houses in these neighbourhoods.”

According to Mr Fedoseev, the unaffordability of many suburbs has become even worse in the last three years.

“Over the years researched, the composition of suburbs in the top 10 least affordable markets has shifted due to various factors,” he said.

“As house prices rose and then fell while interest rates increased during the same period, Sydney suburbs have become more dominant in the list of least affordable markets.”

He said the years-to-own figure in Strathfield has ballooned from 84 to 144 years within a span of 3 years, because of the already high house prices, reduced affordability as interest rates have risen and the wide disparity of incomes within the suburb.

Mr Fedoseev said he expects the most unaffordable suburbs to see slower growth than more affordable areas going forward.

“Suburbs with high “years to own” values are likely to experience downward pressure on house prices, as locals may struggle to afford purchasing houses as prices rise and incomes lag,” he said.

“However, there are other market variables that may still push the prices up even in low affordability markets.”

While it is challenging to determine with certainty whether the situation for homebuyers will worsen or improve, monitoring market trends, ongoing efforts to curb inflation via interest rate rises as well as other government policies can provide invaluable insights into the evolving housing market landscape Mr Fedoseev said.

“The key driving forces contributing to decreasing affordability in the housing market are suggesting that the situation may get worse before improving,” he said.