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Greater Sydney’s property market will be unaffordable for anyone on an average income by the next decade, a study has predicted.
The study, published earlier this month, analyzed property costs from 2004 to 2022 in Greater Sydney, using this data to forecast the market out to 2031.
According to the results, the quarterly costs for every property across the city will be unaffordable for anyone on average income until at least 2031.
It’s no secret that property prices in Sydney are expensive.
According to some figures, the average cost of a house in the NSW capital is $1.4 million, making it the most expensive in the country.
But property prices across Greater Sydney will be unaffordable for anyone on an average income until at least the next decade, according to a new study.
The study, published earlier this month in Cities magazine, forecasts property prices in Sydney from 2022 to the end of 2031, doing so by analyzing the city’s market from 2004 to 2021.
The authors then compared the expected repayments of these estimated values with NSW median full-time and part-time earnings.
According to the results, quarterly payments – including houses, apartments and townhouses – in 2031 for full-time median earners will be, at a minimum, twice the ideal ratio of housing payments to income.
“While we expected the issue of housing affordability to be severe for part-time employment, we found that full-time workers are also significantly affected,” said Professor Chyi Lin Lee, who co-authored the study.
“This highlights the widespread housing affordability crisis and the need for comprehensive policy solutions.”
Property value growth is expected to be unaffordable for average incomes by 2031
According to Mustapha Bangura, a property finance lecturer at the University of Technology Sydney and lead author of the study, the initial aim was to explore what rising housing costs meant for part-time workers.
Part-time work is growing across Australia. According to the ABS, between October and April, part-time employment increased by 104,299 people, almost double the increase for full-time employment over the same period.
“[Housing affordability] it’s already an issue, but when you link it to the employment contract, we think it’s worth examining to see what the future holds,” said Dr Bangura.
Dr Bangura and Professor Lee began their research by first reviewing the Greater Sydney property market quarterly from 2004 to 2021.
The authors then compared these prices, and their potential quarterly repayments in the case of a mortgage, with NSW median full-time and part-time incomes in 2021 to determine the “entry affordability index”, or ratio of housing costs with income.
Anything at 30 percent or below was considered affordable.
According to the analysis, only a small proportion of “strata housing”, or properties that include apartments, across Greater Western Sydney were about 30 per cent for those earning a median full-time income of $1500 a week.
But looking ahead, the analysis predicted the cost of any Greater Sydney property would be unaffordable for anyone on any average income until at least the end of 2031.
According to the results, the entry affordability index for a home in eastern Sydney in 2031 for someone earning $1500 a week would be around 170 per cent.
A house near Parramatta for someone earning $600 a week, or the median part-time income, would be roughly 174 per cent.
“It’s not going to improve for at least the next five to six or up to 10 years,” Dr Bangura said.
Dr Bangura added that anyone earning this income looking to get a loan or make housing payments will need to rely on financial assistance, including the Bank of Mum and Dad.
“This is an issue because the dream of owning property in Australia is gradually fading unless you have wealth in other assets or receive financial support from family members.”
‘Not a positive picture’
Michael Fotheringham, managing director of the Australian Housing and Urban Research Institute, saw the results as further confirmation of Sydney’s increasingly unaffordable property market for both low and middle income earners.
“It’s not a positive picture of improving housing affordability. It speaks to the level of challenge in changing our housing markets,” Dr Fotheringham said.
“We have such unaffordable housing in Australia and it will take a long time to really improve housing supply.”
Dr Bangura said there would be consequences if housing payments exceeding 30 per cent became more common.
“This means you may have to compromise on your family expenses, for example, the costs of education or recreational activities for the children.”
One risk is that these high costs can also cause “housing-induced poverty”, where money that is earmarked for essentials is spent on housing.
“They may have to cut back on their budget, food or essentials to be able to afford their housing costs,” Dr Bangura said.
Dr Bangura said the solution to this issue is complex but will have to address both supply and demand for housing in the city.
This could look like increasing housing grant limits for better cooperation between local, state and federal governments and increasing the supply of affordable housing.
“A way [to increase supply] is the acceleration of inclusive zoning.”
Inclusionary zoning either mandates or encourages private developers to include affordable or social housing in a residential development.
“It can help,” said Dr Bangura. “And then also allowing [developers] to increase the number of apartments in a given block.
“Because with developers, it’s going to be a lot faster than bringing all three levels of government together.”
Dr Fotheringham said the results of the study showed him that, regardless of the solutions, creating a more affordable market in Sydney would not happen quickly.
“There’s a lot of work to be done and there’s no one thing that’s going to fix it all,” he said.
“This is just a further reflection that this is a long-term challenge that we need to address.”
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