Home loan calculator shows how screwed the Sydneysiders are when it comes to buying a home

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Sydney rent prices have become a common joke in Australia. The market has exploded to the point that storage houses and disheveled blocks are now selling for mind-boggling amounts of money. The issue has become a critical point for generational and political tensions, and would-be homeowners are fed up with hearing, “If you weren’t eating so much avocado toast, you might afford one.”

Seems familiar? A recent experiment conducted by DMARGE using realestate.com.au’s Borrowing power calculator just confirmed that no matter how much we cut back on our avocado splurges, the average Sydneysider is going to have to make a lot of lifestyle changes before buying even half the average house.

Interest piqued? Discover our journey with the Borrowing power calculator below.

The first step is to answer the question “where are you in your real estate buying journey”. Your options are: “I just bought”, “I am ready to make offers”, “I research and inspect” and “I am only browsing.”

For the sake of the experiment, we hit “search and inspect” and move on. Next question: “will you be living in the property when you buy it?”. We answer: “yes”.

Finally, having nailed the details (State: NSW, City: Sydney, are you a first-time home buyer: yes) we come to the next section:

“How many people will buy this property?”

“How many dependents do you have in total?”

Our responses? “Just me”; “zero.”

Next question? Total funds available for deposit.

Given the ABC recently reported that the median house price in Sydney is $ 1,309,195, we put
$ 130,919 ($ 1,309,195 divided by 10) as the answer.

Next question: what is your salary? Here we enter the average salary of a Sydneysider (according to Wage scale): 76 KB, minus taxes, which equals $ 60,393.

Image: DMARGE screenshot

Then, provided you don’t have any additional income or credit cards to report, you get to the next step: “Do you know your monthly expenses (less rent)?”

According to homeloanexperts.com, the average cost of living in Australia for one person is $ 2,835 per month, including rent. The average rent in Sydney is $ 540 for houses (according to a Field rental report from December 2020). We deduct the $ 540 from the $ 2,835 and enter $ 2,295 into the calculator.

Image: DMARGE screenshot

Then comes the moment of truth: the result.

Image: DMARGE screenshot

It’s official: the average Sydney Sydneysider has the purchasing power (if they’ve already racked up a 130k down payment) to buy… half the average house! In fact, with the average price of a house in Sydney being $ 1,309,195, with a purchasing power of $ 547,000, you are actually missing 215,195 to be able to buy half the average house …

Solutions? Get a better paying job. Find a partner to buy a house with. Buy a home in a less desirable neighborhood. Buy a unit. Become a digital nomad and move to Noosa. I hope the bubble will burst. This is the casual take.

Going beyond mouth, we spoke to Brodie Haupt – millennial real estate guru and CEO / co-founder of the Australian digital loans and payments provider. WLTH, to have his thoughts.

“There are a number of signs to watch out for when talking to clients that suggest they are over-indebted, starting with personal debt,” Haupt told DMARGE.

“We’re seeing personal loans and credit cards with high limits or multiple accounts, and we’re also seeing more payday loans, sometimes even multiple accounts. If potential customers take a long time to apply for a loan, it is difficult to see how they will be able to service a home loan at current rates. The main problem with this is that rates are currently at historically low levels, so lenders should consider what an increase in interest rates would mean. “

“For anyone applying for a home loan, there has to be a comfortable pad in place, just in case interest rates change,” Haupt added, when we asked for his opinion on what counts as debt overhang. current market, which we all believe is overstated – but which some say could be backed by the government forever.

“Rates are expected to change, but we expect it to be over a number of years, with small incremental increases to ensure Australians can slowly adjust to the change. A 1% change in rates would potentially put the majority of Australians with a loan under enormous pressure. “

“We have seen over the past few months, as house prices continue to rise, more and more Australians are trying to increase their borrowing capacity to gain access to the real estate market. This can create a number of problems down the line, especially if people are spending too much to buy the home they want when rates are low, ”Haupt explained.

“If they are exceeded at current rates if there is a change in the near future, how will they be able to service the loan on an ongoing basis?” This increases household debt and stress, which can negatively impact Australians. “

Regarding the interest rate freeze (or not), Haupt told DMARGE: “In some scenarios, fixed rates can make sense, especially to fix a percentage of your overall loan.”

“One of the problems with repairing your loan is taking away flexibility, so while the rates may look attractive, it could end up costing you a lot more in the long run. For whatever reason, your financial situation might change and you might be able to pay off a large portion of your loan or you might want to pay off larger installments if you get a raise so you can pay off your loan faster, but a fixed amount. a loan can impact your ability to do so and end up costing you more in the long run in fees. “

“Before choosing a fixed rate, it’s a good idea to make sure you are aware of all charges and do your research so that you understand all the information available. This will help protect you from unforeseen costs that might arise. “

“The difference between buying a $ 800,000 unit and a $ 2 million house for a couple will depend on income, savings, investments and current financial situation. It is important to check how well you are able to make repayments. If you’re looking to figure out if you’re over-indebted, do your math and make sure you can live comfortably after you’ve made your repayments. “

“This includes the ability to save money and have an emergency fund for unforeseen expenses, such as medical bills and damage to your home and motor vehicle, which always seem to happen in the home. when you least expect it. ”

Here is your dose of Sunday realism, served hot.

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