It’s no secret that Sydney’s cost of living is rapidly rising. In addition to being the most costly city in Australia to buy a home, Sydney was also ranked as the second most pricey city in the world to do so. Renters have also felt the effects of this. The following information will help you understand why housing in Sydney is so expensive.
Sydney has Australia’s highest cost of living.
According to a study released earlier this year, Sydney is not only the most expensive city on the planet to buy a home, it is also the most costly area to buy real estate in Australia. In 92 significant housing markets across eight different nations, the Urban Reform Institute and the Frontier Centre for Public Policy’s study evaluated the affordability of middle-class housing.
According to the report, Sydney came in at number 91 out of 92 major property markets, only behind Hong Kong. The survey ranked Melbourne as the fifth least affordable market. The second-largest city in Australia saw unheard-of decline as a result of the COVID-19 pandemic.
According to the poll, Adelaide ranked 79th in terms of home affordability, making it the second most expensive city in Australia, followed by Brisbane at 76 and Perth at 73. In reality, since the early 2000s, those five Australian property areas have been regarded to be severely unaffordable.
The most recent poll follows a report from the end of 2021 that discovered first-time homebuyers in Australia need nearly ten years to save for a down payment. It would take about 11 years to save for a 20% deposit on a home if the typical Australian household saved 15% of their gross annual income.
Is Sydney real estate too expensive?
Yes. At the end of 2021, Sydney’s housing affordability fell to its lowest point in a decade even though interest rates were at an all-time low and the typical home price had surpassed $1.3 million.
A Sydney home with a yearly salary of $135,000 would have to spend 45% of its income just paying down its mortgage, up from 36% the previous quarter, according to a news.com.au story. If prices even slightly increase, Sydney might see its worst affordability in a decade because the low mortgage rates won’t be enough to make up for the sharp price increases.
According to expert Pratik Joshi, real estate in Sydney is at its worst point in the previous ten years. According to our simulations, Sydney’s home affordability will reach its lowest point in ten years if prices rise by 4.6% or the average mortgage lending rate rises by just 0.42 percentage points to 3.87%.
If home prices climb by 15% or if mortgage lending rates approach their average for the previous ten years of 4.79%, Australia would, on average, experience its worst affordability in a decade.
Why Sydney housing is so expensive
Sydney’s home affordability problems have historically been attributed to a few causes. One is that Sydney’s housing supply is simply unable to keep up with the city’s expanding population. In Australia’s largest city, a shortage of land release is another factor contributing to rising real estate costs.
More recently, the rapid rise in housing prices has been ascribed to historically low mortgage rates, a significant increase in household savings, government stimulus, and bettering consumer sentiment following the relaxation of coronavirus lockdown measures.