An inconvenient truth: you're paying less for your Sydney mortgage now than a decade ago

Sydney homeowners are spending a smaller portion of their income on mortgages than a decade ago, challenging perceptions about housing affordability and the prevailing levels of mortgage stress. Families in NSW continue to spend the most on housing; an average of $488 is ploughed into home loans each week, an increase of $8 a week from two years ago, but less than the peak of $520 in 2005-06. And while rental payments Australia-wide have stabilised, in NSW they have stormed ahead. The average household renting in the private market now spends $440 a week on housing, up from $433 two years ago and $332 in 2005-06. The figures, released on Friday by the Australian Bureau of Statistics, show that around the country the average home buyer spends 16 per cent of their household income on housing, down from 19 per cent a decade ago. It is the lowest rate since the ABS records began more than two decades ago. That was largely down to the huge reduction in interest rates, which remain at near-record lows, and the growth in household incomes over the decade, according to the ABS. John Daley of the Grattan Institute warned the housing affordability crisis persisted despite the figures. "Spending on housing is not going up particularly fast, but only because interest have fallen so far," he said. "If interest rates go up from here, it will get ugly quite quickly."

Across the nation, the average household with a mortgage now for the first time spends more of its income on food than it does on housing. Housing costs include mortgage payments, and water and rate payments. Adjusted for inflation, the average household with a mortgage paid $434 a week in 2015-16, much the same as in 2005-06. But over the same period the average income climbed from $2272 a week to $2759. "Mortgage and property values have also increased in the last decade," Dean Adams, the ABS director of household characteristics and social reporting, said. "Ten years ago, the real median dwelling value was $449,000, which climbed to $520,000." Mr Adams said the burden imposed on households with mortgages might be even lower than the survey suggested. "Our survey measures what they chose to pay in mortgage costs, not what they had to pay," he said. "As rates have come down, some will have spent more than they need to in order to get ahead on their loans." Canberra is the easiest city in which to pay off a mortgage, with monthly payments of 15 per cent of income, a near record low. Sydney and Hobart have monthly payments of 17 per cent, and Melbourne, Brisbane, Adelaide and Perth have monthly payments of 16 per cent. But housing costs have deteriorated for renters across the country. The average cost for households renting privately is $350 per week, less than the $452 cost for households with mortgages.

Private renters are worst off in Hobart, paying 22 per cent of household income, and best off in Darwin. Sydney, Canberra and Adelaide renters pay 21 per cent, and Melbourne, Brisbane and Perth renters pay 20 per cent. The best-off Australians are those who own outright who typically spend just $51 per week on housing; 3 per cent of their incomes. The proportion of households renting privately has climbed to 25.7 per cent, the highest on record. Twenty years ago it was 19 per cent. The proportion of households owning or buying homes has slipped from 70.9 per cent to 67.2 per cent. Among home-owning households the proportion that have paid off their mortgages has fallen dramatically, from 42.8 per cent of all households to 31.4 per cent. The proportion of older households still paying off mortgages has tripled in the past decade, climbing from 7 per cent to 21 per cent. Mr Daley said the most important finding was that low-income households were increasingly stressed. The poorest were now spending 28 per cent of their income on housing, compared to 23 per cent a decade ago.

Two out of every nine homeowners owned more than one property, either for use as a second home or for renting out. One in 14 owned more than three. The number of people per home fell from 2.7 in 1995?96 to 2.5 in 2005?06, but has since climbed back to 2.6. Treasurer Scott Morrison this week moved to reassure US investors - and Australian mums and dads - that Australia was not headed towards a housing market crash, arguing house prices were high but their value was still "real". His comments followed the Domain Group's State of the Market report, which found house prices in Sydney had fallen by 1.9 per cent in the three months to the end of September.

SMH / October 13 2017

newsletter