Housing affordability is shaping up as a major topic as we head toward the next federal election. The numbers are staggering. Ten years ago, the median house price in Sydney was $880,000, and in Melbourne it was $630,000. Today, those figures are $1.7 million and $1,200,000, respectively. This equates to an annual increase of 7.93% for Sydney and 6.8% for Melbourne.



Meanwhile, wages have not kept pace. Over the last decade, gross income growth has averaged just 2.18% per year for Sydney and 2.03% for Melbourne. This disparity is continuously widening the gap between the haves and the have-nots. Children of well-resourced parents have been able to enter the market by drawing on the Bank of Mum and Dad, and this demand has driven prices up further, making affordability even harder for those without such support.




The solution is complex, as numerous factors are contributing to the problem. Some of the key factors are a surge in migration putting pressure on rental accommodation, a growing shortage of skilled labour and materials, and militant unions forcing up costs. In addition to this, bureaucratic delays at all levels of government and the rising cost of regulation have made the situation even more challenging.

Yet another hurdle is mortgage insurance, which is required for buyers with less than a 20% deposit. For example, analysis from Mozo.com.au shows that if you bought an $850,000 property with a 5% deposit of $42,500, the lender’s mortgage insurance fee would be almost $38,000 – nearly as much as your deposit.



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