If those homeowners had a 20% deposit saved and secured a typical Australian owner-occupier variable interest rate deal of 6.3% in June, they would then be facing $32,759 in mortgage payments over the coming year.
That’s equivalent to a typical Darwin family handing 23% of their annual earnings over to the banks.
It’s also less than the commonly cited example of buyers being comfortable when spending no more than 30% of their income on mortgage costs.
By contrast, Sydney families would need to earn $253,000 — or $121,000 more than the city’s typical income — to spend just 30% of earnings on mortgage payments.
Aucklanders would need $219,000 — or $85,000 more than the city’s typical income.
Wellington buyers would need to earn $194,000, Brisbane buyers $188,000 and Melbourne buyers $168,000.
Nick Goodall, head of research for analysts CoreLogic, said Darwin’s affordability would appeal to many Kiwis struggling with the cost of living in New Zealand, but it’s tropical heat, isolation and relatively small size might not be everyone’s cup of tea.
“You earn great money up there, but that’s not a lifestyle for everybody, and there’s probably very limited industries which would support that level of income,” he said, explaining the city’s high median income is probably due to many residents working in the mining industry.
CoreLogic chief property economist Kelvin Davidson previously told the Herald the sky-high earnings needed to comfortably buy in most cities was another sign of how tough the market can be for buyers.
“If 30% is kind of the affordable income you need and that income is way above what people actually do earn, it illustrates the affordability challenge we have,” he said.
However, he cautioned against placing too much importance on measures of comfortably affording to buy.
“There’s the difference between what is ideal and what’s reality,” he noted, saying families often stretch themselves much thinner financially when chasing their dreams of owning their own home.
Illustrating the difference between the ideal and reality, the table above shows the Herald’s analysis of how much income typical families put towards buying a house in each main city.
It’s based on house price data from CoreLogic, income data from Kiwi economists Infometrics and the Australian National University, and typical interest rates from the reserve banks of New Zealand and Australia.
It shows Sydney is the most unaffordable city in either country, closely followed by Tauranga.
Sydney homes sold for a median price of NZ$1,277,679 during the second quarter of this year, according to CoreLogic.
That would leave a buyer with a 20% deposit facing $75,921 in mortgage payments over the coming year.
Paying that mortgage would use up 58% of the buyer’s earnings if they earned Sydney’s median household income of $132,000, according to the Australian National University’s Centre for Social Policy Research.
While Darwin is the most affordable city by the same measure, Melbourne, too, is an attractive destination for Kiwis crossing the ditch due to its greater range of jobs and industries.
With its $850,108 median sale price and typical income of $120,000, Melbourne is typically more affordable than any main city in New Zealand.
A typical Melbourne buyer would spend 42% of their income on mortgage payments.
CoreLogic’s Goodall said in more unaffordable cities like Tauranga, it was likely many buyers already owned homes and used the equity built up in these to put down bigger deposits on their new houses.
That could help reduce the size of their mortgage payments significantly.
Another way to weigh up the cost of moving across the ditch is to add up how much a home buyer purchasing a median-priced home would need to outlay in the first year after getting their house.
By this measure, Sydney and Auckland buyers would fork out the most.
A Sydney buyer would have to spend $331,000 in the first year, made up of a $255,000 deposit and $76,000 in mortgage payments, while an Auckland buyer would need to hand over $270,000.
Darwin, Dunedin, Christchurch and Hobart are the cheapest.
A Darwin buyer would need to spend $143,000, while a Dunedin buyer would fork out $156,000.
Typically, those buying a median-priced home wouldn’t be first-home buyers, Goodall said.
Likewise, those Kiwis buying a median-priced home in Australia would probably have lived in the country for several years or would have already owned a home in New Zealand that they sold to help finance their purchase, Goodall said.
