In Part 1 of this two-part series, we compared the cost of living in the three major capital cities along the Eastern side of Australia – Brisbane, Sydney and Melbourne. In Part 2 we now look at overall affordability of property, understanding how much new property costs to buy and how much of an average income needs to be allocated to mortgage repayments.
We’ll start by looking at the average wage in Brisbane. The 2016 Census data tells us that the median weekly household income is $1,562, which means a yearly income of $81,224 / yr.
For Sydney, the 2016 Census data tells us that the average weekly household income is $2,099 in Sydney. This equals about $109,148 / yr.
Melbourne, again according to the 2016 Census data, has an average household income of $1,542 a week (or $80,184 a year).
For the purposes of this exercise, we will assume that you are purchasing a property of 70 sqm’s. Using the average rate per sqm as identified in the first part of our story, this will make our new apartment purchase prices the following:
Brisbane – 70 sqm x $7,000 / sqm = $490,000
Melbourne – 70 sqm x $10,000 / sqm = $700,000
Sydney – 70 sqm x $15,000 / sqm = $1,050,000
If we put these amounts into a loan calculator – and assume you’ve paid the 10% deposit, with a 30 year repayment period, and a 5.22% per year standard variable home loan rate – than your monthly repayments will be:
Brisbane – $2,428
Melbourne – $3,468
Sydney – $5,201
So know lets look at average income less mortgage repayments less living expenses.
Brisbane – Income ($81,224) – Mortgage Repayments ($29,136) – Living Expenses ($14,208) = Net Balance Income of $37,880
Melbourne – Income ($80,184) – Mortgage Repayments ($41,616) – Living Expenses ($14,845) = Net Balance Income of $23,723
Sydney – Income ($109,148) – Mortgage Repayments ($62,412) – Living Expenses ($15,453) = Net Balance Income of $31,283
The big surprise is that Melbourne comes in at the lest affordable of the 3 cities. We expected Brisbane to come out on top simply due to the much lower apartment purchase price, and the huge differential to Sydney prices made us intuitively think that Sydney would be the lest affordable, however Melbourne wins with a unique mix of high average prices, but not so high average incomes.
**note – living expenses used here are for a single adult only. Average income is for a household, so we use the two figures for indicative reference only rather than as a method for absolute calculation of affordability itself.