Higher interest rates make Brisbane Australia’s toughest property market for couples to buy - realestate.com.au

Brisbane has been labeled as Australia’s most unaffordable capital city for couples looking to purchase a home, according to a recent report by Compare the Market. This assessment highlights that despite a decline in property values, affordability issues persist due to increased loan sizes and elevated interest rates, leaving many working individuals in Queensland unable to afford median-priced homes across most local suburbs.

The forthcoming Household Budget Barometer reveals that only 12.76 percent of suburbs within Greater Brisbane are affordable for first-time buyers earning two average salaries. This figure represents a significant drop from the previous year, when couples could find affordable options in 43.43 percent of the area’s suburbs. As a result, Brisbane is now identified as the most challenging property market for dual-income households in Australia. In contrast, Adelaide ranks second with 14.95 percent of suburbs considered affordable, followed by Sydney at 16.88 percent and Perth at 22.11 percent.

The analysis evaluated 3,363 suburbs across the nation, comparing estimated mortgage repayments with median household incomes based on an 80 percent loan-to-value ratio. A property was deemed affordable if its repayments did not exceed 30 percent of a household's income. For a typical couple in Brisbane, earning a combined median income of approximately $149,000 annually, their maximum budget would be around $3,741 per month.

Furthermore, the report indicates that not a single suburb in Greater Brisbane was classified as affordable for individuals earning an average single income, effectively shutting out solo buyers who lack substantial cash savings or family support. Andrew Winter, a property expert from Compare the Market, noted that these individuals find themselves competing for more affordable units against couples who have been priced out of larger homes and more sought-after locations.

“It’s a peculiar situation. Property prices are declining, which should ideally enhance affordability, but the rise in interest rates is counteracting those benefits by reducing borrowing capacity,” Mr. Winter explained. “At the same time, there is a severe shortage of properties available for those earning a single salary.”

On a national scale, couples earning two average salaries can afford at least one type of property, primarily units, in 38.61 percent of suburbs. This is a decrease from 53.63 percent recorded the previous year. Mr. Winter emphasized the importance of understanding one's borrowing capacity, especially in light of potential job loss or career breaks, as there is little flexibility between income and repayments in the current market.

In a related study from PRD Real Estate, alarming statistics reveal that existing homeowners are also facing challenges due to rising interest rates. The PRD Australian Economic and Property Report states that mortgage repayments now account for a record 50.9 percent of family income. This is attributed to four interest rate increases within the year and escalating loan amounts, pushing affordability to its limits. Dr. Diaswati Mardiasmo, chief economist at PRD, remarked, “There is no doubt that the economy is feeling the pressure. In the real estate sector, we are observing longer times on the market and, in certain areas, a decline in median house and unit prices.”

Among the remaining affordable suburbs for houses in Greater Brisbane, Russell Island stands out with a median value of $537,963, requiring manageable monthly repayments of $2,627. Other relatively affordable options include Macleay Island, with a median price of $607,960, and Toogoolawah at $615,770. For units, several suburbs in the south, such as Logan Central, Woodridge, and Slacks Creek, have prices below $600,000, making them accessible for couples.

In stark contrast, the inner ring areas of Brisbane have become prohibitively expensive for most buyers. For instance, the median price for a house in New Farm has skyrocketed to an astonishing $3.32 million, which translates to monthly repayments exceeding $16,200.