Sydney salary now required to afford house, revealed in new data – realestate.com.au

Sydney households will need to earn almost $305,000 to afford an average townhome and $165,000 a year for a unit by the end of 2026 if projected interest rates and price increases materialize, new data shows.

The analysis of PropTrack pricing models and interest rate forecasts from two of the nation’s four major banks showed that a period of improved housing affordability could soon close.

Both ANZ and Westpac now forecast no further rate cuts in 2026 due to persistently high inflation, with both banks expecting cash rates to remain unchanged until the end of the year.

This persistent interest rate environment would coincide with continued price increases throughout the year, which, while slower than 2025, would mean buyers would need much larger budgets to keep up.

PropTrack models predict continued price increases through 2026, with Sydney values ​​expected to rise by around 5 per cent over the year, up from almost 7 per cent in 2025.

The research group noted that these increases would be driven by migration-fueled population growth, housing shortages and government buyer support such as the First Home Guarantee Scheme.

This Castle Hill home recently sold for $2.68 million.

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These forces would be a “tailwind” that would soften some of the market impact of a changing interest rate environment, PropTrack economist Angus Moore told The Daily Telegraph in December.

Continued price increases would also be driven by strong demand for the most affordable housing – rather than demand for housing at the top end of the market.

A homebuyer looking to purchase a median-priced home ($1.62 million) in Sydney with a 20 percent deposit currently needs an income of about $291,000 to afford it and not end up in mortgage stress.

Avoiding mortgage stress meant that the buyer would spend no more than a third of their income on housing costs.

Condo buyers currently need an income of $157,000 per year to afford an average-priced apartment with a 20 percent down payment and an average mortgage rate.

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Melinda Jennison, president of the Real Estate Buyers Agent Association, said interest rates would play a decisive role in the market.

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Another 5 percent price increase would change this requirement.

Since the average home now costs nearly $1.7 million, a homebuyer would need about $305,000 to afford the purchase.

Apartment buyers would need to earn $165,000 by the end of 2026 to still afford a median-priced apartment.

Melinda Jennison, president of the Real Estate Buyers Agents Association of Australia, said housing shortages will push up prices in 2026.

“We are well behind the objectives of the Housing Agreement and without a material easing of immigration, demand for both buying and renting will continue to exceed supply in many cities,” she said.

“I expect continued depth in the more affordable housing and townhouse markets as higher-income households are pushed out of the upscale suburbs and into the mid-ring and outer locations.”

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Hotspotting founder and real estate analyst Terry Ryder.

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Terry Ryder, director of research group Hotspotting, said in a note to investors that most markets in Australia would perform reasonably well in 2026.

“Demand is being driven by unprecedented levels of infrastructure investment (and) by high population growth,” he said.

“At the same time… we continue to build far too few new homes, the supply of homes is extremely low everywhere and vacancy rates continue to fluctuate around historically low levels.”

Mr Ryder added that $900 billion in major infrastructure projects would make it harder for new construction to meet demand.

“It creates more economic activity and jobs – and therefore more demand for real estate,” he said.

“And it is exacerbating the shortage of new homes as tradespeople work on the big government projects instead of building new homes and units.”

This Greystanes home recently sold for $1.625 million.

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Intuitive finance director Andrew Mirams said first home buyers would be a key driver of the 2026 market due to government support allowing them to buy with a 5 per cent deposit.

“Government stimulus and the 5 percent deposit scheme, while also raising purchase limits and abolishing income tests, means this market could see a boom until 2026 and beyond,” he said.

A potential wrecking ball for current forecasts for further price growth in 2026 would be interest rate hikes – the expectation of CBA and NAB.

CBA predicts that there will be a single rate increase for 2026 in February. NAB has predicted two rate hikes in 2026, one in February and one in May. Most other forecasters rule out rate hikes at this stage.

Mr Mirams said rate hikes could impact market sentiment and make buyers more hesitant, but slow construction at a time of strong population growth could mitigate much of the impact.

“We still have a chronic shortage of buildings, so if the government doesn’t tackle migration we will continually have a shortage of supply to meet demand.”