A $2.7 Million Sydney sale shows just how screwed first home buyers are right now

brown and white concrete house near green grass field during daytime

We’re beginning to sound a little like a broken record when we whine about Australia’s (and Sydney’s) housing affordability problem. This property sale in Harbour City’s bohemian Inner West shows just how serious the problem is.

A modern four-bedroom terrace-sized home in Alexandria, went under the hammer at an online auction and sold for an unprecedented $2.68 million to a young couple from Paddington who happened to be first home buyers, reports. It’s not the property’s price that is interesting. The fact that the house was purchased by first-time homebuyers is what makes it so special.

brown and white concrete house near green grass field during daytime

Okay, it’s possible that the young couple had ‘The Bank of Mum and Dad’ backing them (if you’re from Paddington these days, you’re probably not too hard up for cash) and Alexandria is hardly Sydney’s most affordable suburb, that’s almost irrelevant. This sale shows how far first-time homebuyers sometimes have to go to be able to enter the property market.

According to statistical report released in May, the average first home buyer in Australia takes out a loan of $431,525. An average deposit of $107, 881 would be paid by a buyer who has a loan-to-value ratio of 80%. This figure has increased 15% in the country since 2019, comfortably surpassing inflation.

Unsurprisingly, that increase has been greatest in New South Wales at 20%, with the ACT not far behind at 18%. The smallest increase was in Western Australia, which saw a mere 9% increase. But we are singing the same song across the country.

Since 2000, real home prices have risen by 150%, while wages have grown by less that a third. At the same time, home ownership has fallen from 70% down to 65%. As you can see, we have a problem. This is only the beginning.

housing loan blocks on brown wooden surface

Investors win and everyone else loses. Brooker continues: “If interest rates were to rise significantly, resulting in more investors finding themselves staring down the barrel of losing money on their property, the federal government will effectively foot part of the additional cost through negative gearing tax deductions…” For Australian property investors, however, losing money in the hopes of strong housing price growth is a way of living.