How Much Crash is Needed to Make a House Affordable?

🏠🤯 THERE IS a lot of “hoo-ha” with the latest budget announcements: the removal of #negativegearing and change to #CapitalGainsTax. Holding #property will become way more expensive especially when your cashflow is already bad. All these measures were done to make property affordable to the younger generation. But, will it work though?

Let’s do the math. According to Australian Bureau of Statistics, median full-time salary is about $90,500. Take away super and tax, the net income is about $64,158 annually or $5342.63/month. So, a couple with combined income will bring home around $10,700/month.

To avoid #mortgage stress, it is said to not have mortgage more than 30% of your take home pay. Therefore, with $10,700, the mortgage repayment component must not exceed $3,210. I put the number into Westpac calculator, at 6.39% interest rate Principal and Interest, a $513,500 loan will have a repayment of $3,219. Perfect match.

A $513,500 loan assuming a 20% deposit means a $641,875 property. What sort of property can you afford with that amount? Now, as a #buyersagent I am very familiar with the market especially in WA. $650k can only really afford you a #strata property like #apartment or #units, or a small-ish house in a lower-socio suburb or ones that needing a lot of cosmetic renovation. If you are looking in a proper “owner occupier” suburbs closer to Perth CBD, a proper 3×2 or 4×2 house will sell for at least $800-$900k+.

Now, here lies the big question. Can that “decent house in a good suburb” of $800-$900k+ go back down to $650k mark? Or do you think housing affordability will remain a challenge especially for the younger generation? What’s your thoughts?