Property seekers across New South Wales have found themselves caught in a financial bind where property prices fluctuate but owning a home has never been more out of reach.
An alarming study by realestate.com.au has found housing affordability has fallen to record lows across the state and country – despite an explosion in properties being sold at six-figure discounts.
In NSW and Sydney, prices have fallen for six months in a row, but the declines have not been enough to offset higher purchasing costs caused by interest rate hikes.
Realestate.com.au’s latest housing affordability index found the proportion of homes offered at prices affordable to the average earner was the lowest since records began in the 1995 financial year.
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A unit in this Ryde building recently sold for $748,300, which was less than the $899,000 the previous owners paid.
A household with the average NSW income could only afford 9 per cent of the homes currently for sale, according to the index.
Saving a deposit has also been deemed more difficult due to sluggish wage growth, rampant inflation and the higher cost of living.
“Low-income households are effectively being locked out,” the realestate.com.au report said.
REA Group economist Luc Redman said the current downturn was “an irony”: existing homeowners watched family home wealth evaporate, but with little benefit for would-be buyers.
“Prices have come down, but they are still elevated compared to previous years,” Redman said, noting that prices need to drop significantly more to improve affordability.
REA Group economist Luc Redman said that despite a decline in the last six months, prices were well above previous years.
“The problem for many buyers is that their costs are rising faster than their revenue,” he said.
With Sydney prices down an average of 4.9 per cent since November, Ray White economist Nerida Conisbee said the problem for many buyers was that their creditworthiness had fallen more than recent price falls.
Competition for typical first-home buyer stocks has also been relatively strong as recent tax reforms, including negative leverage limits, have pushed investors into the same areas first-home buyers often target, Ms. Conisbee said.
“The lower end of the market is the most competitive,” she said.
Buyer’s agent Bek Antognelli, director of Brightside Buyer’s Agency, said Sydney was a “buyers’ market” but there were many buyers unable to take advantage.
“It’s a great time to buy a villa in the Hills, but if you’re looking to buy in the $800,000 range to get first-time buyer incentives, prices won’t drop much,” she said.
Auction clearance rates have been around 50 percent for weeks, indicating a “buyers’ market.” Image: Jeremy Piper
Kent Lardner, head of research at analysis group FoundIt, said the government’s claims that recent price falls had created a “level playing field” for first-time home buyers had not been borne out.
“It is becoming increasingly difficult to save up the deposit for a first home as rents rise and the cost of living skyrockets,” he said.
“Prices may be falling at the top end of the market, but there is a real shortage of homes priced under $750,000. We’re just not building enough cheap homes.”
Mr Redman said household incomes and housing construction would need to increase significantly for there to be a significant improvement in housing affordability.
“A far better outcome would be for property prices to stagnate and incomes to catch up quickly,” he said.
In order for housing to become more affordable, the supply of housing would have to be drastically increased. Image: Brook Mitchell
Dundas shopper Bek Antognelli with children Rosa, 1, and Leo, 3, said those wanting to score bargains need to know where to look. Image: Justin Lloyd
A recent ANZ property modeling analysis, which predicted a fall in Sydney house prices of around 14.5 per cent, showed the current downturn could be a significant drag on the economy.
An average price fall of this magnitude would reduce household property wealth in NSW by $653.2 billion by the end of 2027, Primara analysis conducted for HomeLoanRates.com.au found.
The total value of assets tied up in the NSW property market would fall from $4.5 trillion at the start of 2026 to $3.85 trillion by 2027.
Clarence White, director of real estate group Menck White, said upsizers were among the few buyers who actually benefited from the current downturn.
“They take a loss on their current house, but they get a bigger savings on their next house,” he said.
