How much do you need to earn to buy a house in Melbourne?,
Home buyers require a six-figure annual household income to afford a house in Melbourne.
As a result, single-income earners face challenges moving up the property ladder.
Specifically, single-income buyers aiming for homes in Melbourne’s inner and inner eastern suburbs need significant income.
According to Canstar data, they must earn over $239,000 annually.
Additionally, they need to provide a 20 percent deposit to service a home loan effectively.
Income needed to buy a property in Melbourne
| SA4 region | Median house price | Income required, single | Income required, couple | 20% deposit |
|---|---|---|---|---|
| Melbourne – Inner | $1,390,000 | $239,000 | $114,000 x2 | $278,000 |
| Melbourne – Inner East | $1,710,000 | $296,000 | $137,000 x2 | $342,000 |
| Melbourne – Inner South | $1,520,000 | $262,000 | $123,000 x2 | $304,000 |
| Melbourne – North East | $800,000 | $140,000 | $72,000 x2 | $160,000 |
| Melbourne – North West | $710,000 | $127,000 | $66,000 x2 | $142,000 |
| Melbourne – Outer East | $965,000 | $166,000 | $84,000 x2 | $193,000 |
| Melbourne – South East | $795,000 | $139,000 | $72,000 x2 | $159,000 |
| Melbourne – West | $673,000 | $122,000 | $63,000 x2 | $134,600 |
| Mornington Peninsula | $870,000 | $151,000 | $77,000 x2 | $174,000 |
Couples need to earn over $114,000 each to buy a house in these areas.
In the inner east, that figure rises to about $137,000.
Canstar’s insights director, Sally Tindall, mentioned that property prices are increasing faster than wage growth.
This trend makes it particularly challenging for single-income buyers to secure adequate home loans while interest rates remain elevated.
Tindall noted, “It’s incredibly tough for singles, especially those relying on just one income.”
Moreover, she highlighted that wage growth isn’t matching property price increases.
Before rate hikes, borrowing capacity was significantly higher for individuals and couples.
In fact, it was sometimes tens or hundreds of thousands more than what borrowers can access today.
Additionally, she stated that while dual-income households find it easier to purchase standalone homes, costs are still high.
Consequently, many buyers are seeking a third income source to assist with their purchases.
Tindall observed that buyers are increasingly relying on parents for financial support, whether as cash contributions or guarantors.
Furthermore, she suggested that starting with a unit or apartment helps buyers maximize their borrowing capacity.
Eventually, they can upgrade by selling their unit or taking out equity from an existing property.
In this way, they can gather a decent deposit for a larger home.
Receive the latest property news and advice directly in your inbox
Couples choosing a unit can purchase it with a salary of around $60,000 each in many areas.
However, single unit buyers face a much higher income requirement, exceeding six figures.
Doug McRostie, 34, and Sarah Messina, 32, recently sold their two-bedroom townhouse in Cheltenham.
They upsized to a four-bedroom house in Mentone, which they purchased in 2022 when rates were at record lows.
McRostie works as a private banker, while Messina is employed in human resources.
Both received pay rises just before buying their new home, enhancing their borrowing capacity.
McRostie mentioned, “[Pay rises] definitely helped. We wouldn’t have been able to do it without them.”
He added that low interest rates made it feasible for their property purchase.
However, he expressed concern, stating that if they faced the same situation today, they likely wouldn’t borrow as much.
McRostie stated that buying a house would have been much harder if they relied on a single income.
Additionally, he noted that already being in the property market made a significant difference for them.
He explained, “We saved up some extra money and then got this property revalued to unlock some equity.”
McRostie also acknowledged how challenging it is for a single person to purchase property today.
Their real estate agent, Kevin Chokshi from Ray White Cheltenham, commented on the local market trends.
Chokshi observed that dual-income earners are primarily the main house buyers in the bayside area.
He pointed out that single-income households often find themselves priced out of standalone homes.
“Generally speaking, anyone buying a house in this area is typically purchasing their second or third home,” Chokshi explained.
Moreover, he noted that it is extremely rare for first home buyers to buy a standalone house here.
Chokshi mentioned that he has observed couples starting families moving in with parents after selling units or townhouses.
This arrangement helps them save for a deposit on a larger home.
Luke Rowland, a partner mortgage broker at Axton Finance, emphasized the importance of income when applying for a home loan.
He stated that pay rises can significantly influence borrowing capacity for potential homebuyers.
“[Buyers] may anticipate a pay rise soon, and that extra income can definitely boost your borrowing capacity,” he explained.
Rowland added that some buyers choose to wait for a pay increase to enhance their borrowing power.
With property prices rising faster than wage growth, many buyers are making compromises or delaying their first home purchase.
Dr. Lawrence Uren, a senior lecturer in economics at the University of Melbourne, highlighted this growing trend.
He noted that buyers may opt for smaller homes, such as units or apartments, rather than freestanding houses.
Additionally, they might consider moving further away from the CBD to reduce housing costs.
