Treasurer Joe Hockey has landed in hot water after suggesting first home buyers first need to get a good job that pays good money, if they want to afford to buy a house.
The treasurer has been accused of being insensitive by shadow treasurer Chris Bowen,"That's just an insult to the nurses, the teachers, the people who are working hard, who just are finding it very hard to break into the housing market."
Leader of the Greens, Richard Di Natale said Mr Hockey's prescription was, "fantasy land…let-them-eat-cake", kind of stuff. He added, "We do have a crisis when it comes to housing affordability."
So let's take a look at what you'd need to buy the median house (detached dwelling) in Sydney.
Now there's some debate over the median house price in Sydney.
The latest data from the Australian Bureau of Statistics (ABS) calculates the median house price in Sydney at June 2014 as $760,000. In November 2014, the median asking price hit more than $1 million for the first time, according to SQM Research. Data from Domain's House Price Report suggests the median house price was $914,000 in March 2015.
Other property price reports suggest high $800's, so we'll use $900,000 as our estimate.
If you want to avoid Lenders Mortgage Insurance (LMI), most people will need to find a 20% deposit, and then there are other fees, including stamp duty as shown in the table below.
| House price | $900,000 | $900,000 |
| Deposit | $180,000 (20%) | $45,000 (5%) |
| Lenders Mortgage Insurance (LMI) | N/A | $39,940 |
| Stamp Duty | $35,990 | $35,990 |
| Transfer fee | $214 | $214 |
| Mortgage Fee | $107 | $107 |
| Conveyancing fee | $1,000 | $1,000 |
| Loan application fee | $600 | $600 |
| Building Inspection | $300 | $300 |
| Pest inspection | $200 | $200 |
| Survey report | $400 | $400 |
| Total you will need | $218,811 | $123,751 |
| Monthly repayments (@ 4.9%) | $3,821 | $4,538 |
Source: ANZ Home Loan Fee Calculator
That shows that not only do purchasers need to have saved a deposit, they also need a substantial sum to cover other costs – as much as $218,800.
If the banks require your mortgage payments to be a third or less of your gross salary, a couple would need to be earning a combined $137,600 if they can come up with an $180,000 deposit. If they only have $45,000 for the deposit, they would need a combined gross income of $163,400.
Unfortunately, according to ANZ, someone on $80,000 with minimal living expenses and no other loans would only be able to borrow up to $548,000. A first-year registered nurse earns around $56,700 a year, which wouldn't be enough to even borrow $548,000.
Clearly, a single person can't afford to buy the median home in Sydney and would have to consider other alternatives such as an apartment, or moving far out west, south or north to cheaper suburbs with lower median house prices.
That's one thing everyone seems to be missing in this conversation. Virtually no-one straight out of school or university can afford to buy the median house in Sydney, no matter how 'good their job is or if it pays good money'. That has been the case for many years and will likely be the case for many years to come.
