Sydney and Hobart are Australia’s least affordable cities for first home buyers

A new report has confirmed what many of us suspected - soaring property prices have made a significant impact on housing affordability for Australia’s first home buyers, especially in the capital cities.

According to the State of the Nation's Housing 2021-22 report from the National Housing Finance and Investment Corporation (NHFIC), Sydney and Hobart are Australia’s least affordable cities for first home buyers, with less than 10% of properties being affordable to the bottom 60% of income earners in those markets.  

Average first home buyer debt was found to be $460,000 – up by $50,000 since the same time last year, and three times what was seen in the early 2000s. That said, the decline in mortgage lending rates in recent years has reportedly helped mortgage serviceability.

Despite a rise in median incomes over the past year, it was found that it would take an extra year on average for first home buyers to save a 20% deposit – that’s 8 years of saving. This is double the length of time it would have taken to save a deposit in the early 1990s, with the size of the deposit increasing fivefold over this time to almost $130,000.

The report also found that house prices increased by 21% over the year to December 2021 in the capital cities, and by 26% in regional areas. This can be partially attributed to more people working from home and migrating to larger houses in regional areas (especially in NSW and Victoria) due to COVID.

With net overseas migration (NOM) expected to return to pre-pandemic levels by 2024-25, demand for housing may start to exceed the available supply. With new housing taking up to 6 years to be built due to lack of available development sites and higher building costs, shorter housing supply could potentially lead to higher house prices and rents.

While being a first home buyer is challenging, there are options available to help make taking your first step on the property ladder that little bit easier. Depending on your situation, these may include:

• Accessing the First Home Owner’s Grant (FHOG) in your state or territory
• Taking advantage of the First Home Loan Deposit Scheme (FHLDS), New Home Guarantee (NHG) or Family Home Guarantee (FHG)
• Saving a deposit with the help of the First Home Super Saver (FHSS) Scheme
• Applying for a home loan with the help of a guarantor

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