Honestly – can this actually be possible?
In a city where the median property value is presently inching towards $900,000, could it really be the case it’s more affordable to pay off a mortgage in Sydney today than it was 25 years ago?
According to a new report by BIS Shrapnel, this is absolutely the case.
A new article presenting their research shows that standard mortgage repayments in 1989 required almost half of the average household’s income to service. However in 2015, the standard mortgage in Sydney requires just over a third of a household’s income, their research claims.
Their figures were calculated based on a 75 per cent LVR, so assuming a property was purchased for $800,000 with a 25 per cent deposit of $200,000, this would leave a mortgage of $600,000.
Factoring in current interest rates of around 4.5 per cent, the monthly principal and interest mortgage repayment on this home sits at around $3,100 per month. Admittedly, this does seem like a manageable amount for a two-income household.
However, there is still one major blocker standing in the path of property buyers in Sydney, and it wasn’t as big an issue for their predecessors in 1989: saving a property deposit.
Because while it may be the case that a mortgage is less of a financial burden on household income than it used to be, saving a $200,000 deposit can be next to impossible for average income earners to achieve.
Til next time, happy investing!