Middle income earners can’t afford Adelaide housing as rates rise

New data highlights the alarming number of South Australians living on the knife’s edge as interest rates look set to rise due to overseas disputes and the local cost of living crisis.

According to Canstar data, an average South Australian – those earning $76,000 a year – with a 20 per cent deposit could buy in 25 properties across the country without getting into mortgage trouble if we see interest rates rise this month.

As a matter of fact, none of these places are in the city of Adelaide.

That number doubles when the rate doubles.

Even worse for those buying with a 5 percent deposit, there are only 13 properties available for less than 30 percent of the maximum salary commitment to avoid mortgage stress.

Add another step up and it comes down to 12.

That’s 12 of the 424 places or towns the company has data for.

The cheapest of these is Coober Pedy, with an average property price of $71,250.

That is followed by Peterborough, Quorn, Whyalla Stuart and Cleve, all with medians below $250,000.

Canstar.com.au director of data Sally Tindall said things were tougher than ever for hopeful buyers.

“This research confirms the brutal truth – that the Australian dream of owning your own home is officially cut off from the average Australian wage in many areas,” she said.

“It’s only when people buy as a group of at least two, and have a decent amount of savings behind them or an inheritance from a family member or property they already own, that they can start to consider something as normal as a house in a major Australian capital.”

As Ms Tindall pointed out, buying with someone else opens up the market a lot, but there are still big challenges.

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Couples buying with a 20 per cent deposit could afford 141 suburbs after one rise, and 132 after two, while couples borrowing 95 per cent of the home’s value could afford 86 suburbs after one rise, and 79 after two.

Ms Tindall said the prospect of further increases was putting home ownership out of reach for many.

“For a full-time earner, a typical 0.25 percent increase to the mortgage rate means a $12,000 drop in the maximum amount they can borrow from a bank,” he said.

“It’s not a deal breaker for many, in isolation, however, a chain of foot traffic can make the stakes out of reach for consumers who are already stretched thin.”

He said that buying with a 5% deposit is a risky strategy, however, that small amount will require a high fee to get the green light from the bank, which has removed the barrier from having a very large deposit to a large income.

Adelaide University professor and director of the Australian Center for Housing Research Emma Baker said the location of these affordable properties is a problem.

“The best thing is that affordable places are far from job markets, that makes it difficult to pay because if you can afford to live there, you have to be able to buy petrol to be able to go to work,” he said.

“We have a problem of not being able to buy properly in South Australia.

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“To some extent our affordability problem is because it’s a great place to live and people want to live here.”

He said provision is needed in areas where people want to live.

“This list of places, although they are beautiful places, are almost all very far from work, and that is a good reflection of that.

“We need more provision but we don’t need it with money to build houses that don’t match what people need.”

Rentvester and real estate agent Jayden Finch, 25, recently bought a mid-rise property and said it’s important for buyers to check their credit.

“I was aware of the increase in prices, so I allowed a buffer of 2% but when I bought I did not expect the prices to go back up, so that hurts, but in saying that the market is strong, so the increase in price is good against that,” he said.

“In unpredictable times we don’t know what’s around the corner, and even if we think prices will go down there’s no guarantee.”

– with Aidan Devine

What suburbs can a moderate income South African Aussie buy in without sending themselves into mortgage distress?

With a 20% deposit and after 2 rate increases

Suburb, Median property value, % spending – Per capita

Coober Pedy: $71,250, $36,000 11%

Peterborough: $205,000, $51,000 23%

Price: $225,000, $53,000 24%

Whyalla Stuart: $239,000, $55,000 25%

Price: $245,000, $56,000 25%

Whyalla Norrie: $265,000, $58,000 26%

Keith: $272,000, $59,000 27%

Port Pirie West: $274,000, $59,000 27%

Roxby Downs: $274,050, $59,000 27%

Ceduna: $285,000, $61,000 27%

Solomontown: $285,000, $60,000 27%

Port Augusta: $297,500, $62,000 28%

Risdon Park: $322,000, $65,000 29%

Cowell: $345,000, $68,000 29%

Yorktown: $349,750, $68,000 30%

Crystal Brook: $350,000, $68,000 30%

Port Augusta West: $350,000, $68,000 30%

Port Pirie South: $350,000, $68,000 30%

Bordertown: $355,000, $69,000 30%

Whyalla Playford: $356,625, $69,000 30%

Jamestown: $360,000, $70,000 30%

Millicent: $385,000, $73,000 30%

Stirling North: $385,000, $73,000 30%

Source: Canstar

With a 5% deposit and after 2 rate increases

Coober Pedy: $71,250, $38,000 13%

Peterborough: $205,000, $55,000 25%

Price: $225,000, $58,000 27%

Whyalla Stuart: $239,000, $60,000 27%

Price: $245,000, $61,000 27%

Whyalla Norrie: $265,000, $64,000 28%

Keith: $272,000, $65,000 29%

Port Pirie West: $274,000, $65,000 29%

Roxby Downs: $274,050, $65,000 29%

Ceduna: $285,000, $67,000 29%

Solomontown: $285,000, $67,000 29%

Port Augusta: $297,500, $69,000 29%

Source: Canstar