By Alan Weiss – Real Estate Agent, Sydney (35+ years)
For most of my career, buying a home in Sydney followed a recognisable path. It wasn’t easy, but it was achievable. You earned a reasonable income, saved consistently, dealt with a local bank manager, and bought something modest before upgrading over time.
That equation no longer works.
What we are experiencing today is not a normal affordability cycle. It is a structural breakdown between incomes, construction costs, and lending rules — and Sydney has quietly become one of the most distorted housing markets in the world.
Yesterday: When the Australian Dream Still Worked
For decades, the fundamentals were broadly aligned.
- Price-to-income ratios typically sat around three to four times household income
- A single income could often service a mortgage in a middle-ring suburb
- Home ownership among 25–34-year-olds exceeded 60%
- Buyers entered through a starter home, built equity, and moved up
The property ladder wasn’t theory. It functioned.
Today: Sydney as a Global Outlier
Sydney has detached from its local economic base and repositioned itself as a global asset market, not a domestic housing market.
- Sydney ranks as the second most unaffordable city globally, behind only Hong Kong
- Buying here is now harder than in London, New York, or Singapore
- In many areas, price-to-income ratios now sit between 13 and 15 times
Ownership today is determined less by income and effort, and more by access to intergenerational wealth. Without help from the so-called Bank of Mum and Dad, many households are structurally locked out.
Tomorrow: Why “Just Build More” Doesn’t Fix the Problem
The NSW Government’s Low and Mid-Rise housing reforms are based on a simple idea:
build more homes and prices will fall.
In theory, that works.
In reality, the math no longer stacks up.
Construction Feasibility Is Broken
Developers cannot currently build apartments in Sydney at a cost that aligns with what buyers can afford.
- Construction costs for compliant apartments are now typically $8,000–$15,000 per internal square metre
- A standard 75sqm two-bedroom apartment costs $600,000 to $1.125 million to build before land, approvals, finance, tax, or risk
Once all costs are included, many projects require sale prices of $1.5 million or more just to break even.
Selling for $1 million isn’t reduced profit — it’s insolvency.
The result is stalled projects, delayed supply, and a policy solution that never materialises.
The $1,000,000 Western Sydney Apartment: The Reality Check
Let’s examine the type of “affordable” housing policymakers often reference:
a new two-bedroom apartment in Parramatta, Blacktown, or Penrith priced at $1,000,000.
In many cases, this price is already below replacement cost, which explains why such stock is scarce.
1. The Purchase Scenario (NSW – Including Stamp Duty)
- Purchase price: $1,000,000
- NSW stamp duty: approximately $40,500
- Total acquisition cost: approximately $1,040,500
(Assumes no first-home buyer stamp duty concession, which is typically unavailable at this price point.)
- Deposit (20% of purchase price): $200,000
- Upfront cash required (deposit + stamp duty): approximately $240,500
- Loan amount: $800,000
- Interest rate: ~6.27% (variable)
- Loan term: 30 years
Before legal fees, inspections, strata reports, or moving costs are added, stamp duty alone pushes the upfront cash requirement well beyond the reach of most households.
The Banking Barrier
Banks do not assess repayments at today’s interest rate. Under Australian Prudential Regulation Authority (APRA) rules, loans are stress-tested with a three-percent buffer.
Assessment rate: approximately 9.27%
What the Bank Actually Tests
To borrow $800,000, the bank assesses repayments at roughly $6,600 per month, not the actual repayment of about $4,950.
Who Can Actually Afford It?
- Required household income: approximately $185,000–$195,000 gross
- Median Greater Sydney household income: approximately $110,000–$120,000
The gap is structural, not behavioural.
The Numbers Side by Side
| Metric | Required | Reality (Average Buyer) |
|---|
| Household income | $190,000+ | ~$115,000 |
| Upfront cash | ~$240,500 | <$50,000 |
| Bank outcome | Approved | Declined |
An average Western Sydney household is more than $70,000 short each year before the bank will even consider lending.
The Verdict: A Double Lockout
We now face two immovable constraints at the same time:
- Developers can’t build
Construction costs push break-even prices beyond what buyers can afford - Buyers can’t borrow
Lending rules and interest rates cap borrowing power below market prices
Until interest rates fall materially, incomes rise sharply, or construction costs collapse, the housing market remains frozen in a state of structural unaffordability.
This isn’t a temporary cycle.
It’s a system problem — and pretending otherwise only delays real solutions.
