Why most young Aussies will NEVER own a housand be forced to live in an apartment

Most young Australians will never own a house in one of Australia’s biggest cities even if they earn an above-average salary – leaving apartments as their only option.

Excessive immigration in recent decades has put a home with a backyard beyond the reach of young, single people looking to buy a mid-priced house in Sydney or Melbourne.

A record 387,000 migrants moved to Australia in 2022, adding to demand for housing, particularly in Australia’s two most populated cities.

Australia’s population growth pace of 1.9 per cent is also among the highest in the developed world, making it even harder for the average-income earner with a university degree to buy a home to live in as they compete with more potential buyers. 

The typical house in Brisbane, Adelaide, Canberra and Hobart is also now too expensive for someone hoping to avoid mortgage stress.

That leaves apartments as the key options in Australia’s most populated cities for those hoping to live a reasonable commute from the city.

RateCity calculated that someone earning $95,481 – a level slightly above the average, full-time salary of $94,000 – would now only be able to borrow $525,800, factoring in the Reserve Bank’s 12 rate rises since May 2022.

That means this individual would only be able to buy a $657,250 property with a 20 per cent mortgage deposit of $131,450.

This deposit alone would take nine years to save up for, based on someone putting aside 15 per cent of their savings a year.

This effort would be futile in Sydney, where the median house price was $1.294million in May, following a monthly value increase of 2.1 per cent despite a series of aggressive rate hikes.

Metropolitan Sydney has few suburbs with a median house price under $700,000, CoreLogic mapping data showed.

Even the most affordable area, Airds near Campbelltown, is still too dear with a mid-point price of $680,183 in a suburb that is 60km from the city centre.

The typical apartment in greater Sydney is beyond the reach of an average-income earner with the city having a mid-point unit price of $797,806.

There are options, however, in western Sydney with Greenacre having a mid-point price of $655,625 and units at Rooty Hill typically worth $653,528.

Northern Sydney has options too with West Ryde having a median unit price of $630,304.

Melbourne’s median house price of $911,007 is too dear for an average-income earner but Roxburgh Park, 25km north of the city, has a median price of $652,140.

Broadmeadows is even more affordable at $570,584 for a house.

City centre apartments are attainable in Melbourne with Docklands having a mid-point unit price of $625,359. 

Bayside St Kilda is even more affordable at $534,336.

Canberra’s median house price of $943,253 is well beyond the reach of an average-income earner but Belconnen in the city’s north is attainable at $616,855.

Apartments at Barton a short walk from Parliament House cost $617,100.

Brisbane’s median house price of $792,125 is too expensive for an average-income earner but Zillmere, just 13km north of the city, has a mid-point price of $637,471.

There are also apartment options right near the city with Kangaroo Point on the Brisbane River and next to the Story Bridge having a median apartment price of $647,372.

Adelaide’s middle house price of $704,448 is marginally too dear for the average-income earner but Kilburn, less than 10km north of the city, has a mid-point price of $652,242.

An apartment in beachside Glenelg is $607,257.

Hobart’s median house price of $696,900 is beyond the reach of the average earner but Lutana on the Derwent River has a mid-point value of $553,149.

An apartment at upmarket Sandy Bay typically costs $623,610.

Some capital cities are still affordable for average-income earners with Perth having a median house price of $606,563.

Belmont near the city and on the Swan River has a mid-point price of $577,399.

Darwin is Australia’s most affordable capital city with a mid-point house price of $585,732. A city centre apartment typically costs $408,628.

The Australian Prudential Regulation Authority considers it risky for anyone to owe the bank more than six times their salary before tax.

The banking regulator requires the banks to model a borrower’s ability to cope with a three percentage point increase in variable mortgage rates.

But since May 2022, RBA rates have increased by four percentage points, this month reaching an 11-year high of 4.1 per cent. 

Each rate rise has reduced an individual’s borrowing capacity, also leading to a drop in house prices over the year.

But in May, house prices rose in every state and territory capital despite the Reserve Bank of Australia’s aggressive interest rate rises, as high immigration and the return of international students meant more people were competing for rental properties.

This encouraged wealthier recent migrants to buy instead of rent. 

The net overseas migration level of 387,000 made up 78 per cent of Australia’s 496,800 population increase with births minus deaths factored in.

Australia’s population growth of 1.9 per cent last year was among the highest in the developed world and at the highest level since 2008, dwarfing New Zealand’s 0.7 per cent and the U.S. rate of 0.4 per cent.

Few rich-world countries had faster population growth than Australia with Canada an exception, with a 2.7 per cent growth rate, accepting more than a million new permanent and temporary migrants last year.

But even then, the American Demographia think tank considers Sydney to be even less affordable than Vancouver, in Canada’s west, when incomes were compared with house prices. 

Only Singapore last year had a bigger population growth pace of 3.4 per cent but 80 per cent of residents in the city-state live in a government-owned apartment, known as a Housing and Development Board.