My Perspective as a Real Estate Agent with 35 Years of Experience.
The Eastern Suburbs real estate market varies across different segments, but one trend remains constant—a decline in transaction volumes. Many homeowners looking to upsize or downsize are finding it nearly impossible due to the substantial additional equity required and the challenges around mortgage serviceability. This has led to more people leaving the area in search of larger, more affordable homes.
The investment market also plays a significant role, contributing to the current rental shortage. Many landlords are exiting the market as rising interest rates and serviceability requirements make it increasingly difficult to maintain their mortgages. This is reducing the availability of rental properties and driving up rents.
The Reserve Bank of Australia’s strategy of using interest rate hikes to control inflation seems both ineffective and misdirected. It’s hard to imagine how Australia’s $11 trillion real estate sector can “dance to the tune” of interest rate adjustments alone. Housing affordability and serviceability challenges won’t be solved by rate changes alone.
A key question I raise for policymakers is: Why doesn’t Australia adopt a lending model similar to the USA, where homeowners can access fixed-term loans for 10, 15, or even 30 years? This would provide much-needed financial stability for buyers. In the US, mortgage interest is also tax-deductible for owner-occupiers, which could be a valuable approach to easing affordability pressures in Australia.
| Region | Median unit price | Income required, single | Income required, couple | 20% deposit |
| Eastern Suburbs | $1,275,000 | $218,000 | $212,000 | $255000 |
| Region | Median unit price | Income required, single | Income required, couple | 20% deposit |
| Eastern Suburbs | $3,700,000 | $654,000 | $616,000 | $740,000 |
The Reality for Sydney Buyers
For example, in Sydney’s Eastern Suburbs, purchasing a semi-detached home in Bondi for $3.7 million would require:
Deposit (20%): $740,000
Stamp Duty: $161,590
Loan Amount: $2,960,000
Monthly Mortgage Payment: $18,283
Required Annual Gross Income: $731,320
After 10 years, assuming an annual property growth rate of 3%, the property’s value could increase to approximately $4.97 million. However, the total mortgage payments over that period would amount to over $2.19 million.
Similarly, for a single buyer purchasing a one-bedroom apartment in Bondi Junction at $900,000:
Deposit (20%): $180,000
Stamp Duty: $35,590
Monthly Payment: $4,447
Required Annual Gross Income: $177,888
After 10 years, assuming a 3% annual growth rate, the property value could reach $1.2 million, but total mortgage payments would surpass the property’s appreciation over the same period.
Conclusion
When considering buying a property, it’s crucial to ensure you can afford it long-term. You don’t want to achieve your dream of home ownership only to struggle with repayments a few years down the track. Make sure your financial planning is sound, and that your future prospects are well accounted for.
Disclaimer
The information provided is based on Alan’s research and understanding of the real estate market. For specific financial advice, it is recommended that you consult with a qualified financial planner or accountant to ensure the right decisions are made for your personal financial situation.
