The great Australian compromise: why many struggle to buy their dream home

It was good fortune rather than good planning that allowed me and my wife to buy a house on Sydney’s northern beaches. With a growing family and a limited budget, we searched for a three-bedroom home close to the city but couldn’t find what we wanted. Having friends on the beaches, we went to an auction in Manly and started bidding. The house we bought was a daggy, ex-rental semi on a busy road, but this was only ever going to be our “stepping stone property” – the best we could afford before moving to our “forever home”. That was 1997, when the median house price in Manly was about $500,000. Now, three-bedroom houses in desirable Manly typically sell for $2.6 million. Twenty years and two major renovations later, our sons have finished school, travelled around the world and started to move out of home (well, kind of). And we’re still here. Our situation is hardly rare. Families, especially in Sydney and Melbourne, have found themselves compromised by the skyrocketing value of surrounding properties. They are “trapped” in their homes for years longer than they intended. Many buyers hop onto the mystical property ladder but never get a chance to live in the home that best suits their needs or desires. The data backs this up. While property values have climbed rapidly, notably in Australia’s largest cities, the number of properties that have sold has plummeted. According to The Australian Affordable Housing Report 2017-18, the number of sales fell from 632,680 over the 12 months to May 2002 to 477,101 in the year to May 2017 – a drop of 24.6%. How much can I borrow?Use UNO's calculator to estimate your borrowing capacity. Calculate NowCoreLogic research shows that owners across Australia now hold on to their properties for much longer. In 2004, a capital city house was owned for an average of 6.8 years. By 2014, the average was 10.5 years for houses and 8.7 years for units. Many of these homeowners are struggling to afford their mortgage repayments, too, despite record low interest rates. Although capital-city home prices jumped 35% in the five years between 2011 and 2016, the most recent census found almost a third of Sydneysiders who don’t own their home outright spend more than 30% of their monthly income on mortgage repayments. Property expert Louis Christopher, from SQM Research, isn’t surprised people feel trapped. “This notion of ‘once you buy, you’re on the property ladder’ can be a bit of a furphy,” he says. “My view is when the market rises, those properties that are further up the ladder can be just as difficult, if not more so, to transact into.” Christopher offers the simple example of a first homebuyer who settles on a $500,000 home but has her eye on a $1 million property up the road. If the market grows by 50% over five years, her property is worth $750,000 but the million-dollar property is now valued at $1.5 million. “In absolute dollars, the $1.5 million property is worth now an additional $250,000 over and above the first property,” he says. “The difference between the two properties was $500,000. Now it’s $750,000. “That said, you’re certainly better off than not buying the $500,000 property to begin with.” Owners looking to upgrade to their dream home in a rising market have a few options. One is to refinance to find a home loan that improves their buying power (try UNO’s refinance calculator). Another is to relocate to a more affordable region or state. The latest property trends suggest that Sydney property values have finally started to come off the boil and the market in places such as Hobart is becoming more competitive. How much can I save by refinancing?Use UNO's calculator to estimate your savings. Calculate SavingsChristopher isn’t sure Tasmania’s property values are rising just because people living in Australia’s biggest cities are looking for their forever home. “Tassie is moving up through a combination of factors, including its better economy,” he says. “Affordability would be one of the reasons, though.” It was certainly a major factor eight years ago for Winsor and Tereza Dobbin. They had put up with things they didn’t like while living in inner-city Leichhardt – excessive noise, slow traffic, “the whole Sydney catastrophe” – and spent much of their money servicing a mortgage when they would rather have been travelling. So, they decided to move to Cygnet – a quiet village 40 minutes from Hobart. The Dobbins bought a four-bedroom 1890s vicarage close to town on a triple block, which gave them the chance to grow fruit trees and have some chickens. “All the local shops are on our doorstep, and you can walk to get some coffee or go to the deli just like you could in Leichhardt,” says Winsor, a freelance writer. “The work here is a bit up and down and you can’t walk into town and get a takeaway but it’s peaceful, we’re 300 metres from the waterfront, the NBN’s fine and it’s less than an hour from the airport.” Tereza is also pleased they chose to escape the city. “All we were doing was going to work to pay the mortgage,” she says. “This is definitely our forever home.” Need a home loan?UNO. The new way to get a better deal. Get StartedBook a call in with UNO