Understanding the Connection Between Your Salary and House Prices in Australia

Australia's housing market has seen dramatic changes over the past decade. Many homebuyers and investors wonder: has my salary kept up with rising house prices? To make informed decisions, it's vital to understand how these two forces interact and what they mean for your financial future.

The Growth of House Prices Compared to Wages

In recent years, Australian house prices have surged significantly. According to the Reserve Bank of Australia (RBA), national median house prices increased by over 50% in the last five years alone. Meanwhile, wage growth has been more modest, typically hovering around 2-3% annually.

For example, in Sydney, the median house price climbed from around AUD 800,000 in 2020 to over AUD 1 million in 2025. During the same period, average annual salaries grew from AUD 85,000 to approximately AUD 95,000. While this looks promising overall, the pace of house price growth has often outstripped wage increases, creating affordability challenges for many.

What Does This Mean for Buyers?

If your salary grows slower than house prices, saving enough for a deposit becomes harder. Even if you earn more each year, the gap between income and property costs widens. This situation impacts first-time buyers, investors, and families aiming to move into better neighborhoods.

However, don't be discouraged. There are strategies and financial tools to help bridge this gap, which we'll explore.

The Role of Mortgage Lending and Affordability

Most Australians purchase homes through mortgages—loans secured against the property. How much you can borrow depends on your income, expenses, and the bank’s assessment.

Lenders typically use a 'serviceability' test to ensure you can handle repayments comfortably. They examine factors like your:

• Income and stability of employment
• Existing debts
• Living expenses
• The property’s purchase price and loan amount

Important: In Australia, if you're a foreign investor or on certain visas, rules from the Foreign Investment Review Board (FIRB) and other regulations apply. They can affect your borrowing capacity and the types of properties you can buy.

Can Your Salary Keep Pace? Comparing Growth Rates

Let’s consider a realistic scenario:

• 2018:

  • Salary: AUD 80,000
  • Median house price in Sydney: AUD 750,000

• 2025:

  • Salary: AUD 95,000
  • Median house price: AUD 1,050,000

Here, salaries increased by roughly 18.75%, while house prices increased by 40%. The result? The ratio of house price to income has worsened, making affordability harder.

Quote:
"House prices outpacing wages means that saving for a deposit and qualifying for a mortgage takes longer, especially in major cities like Sydney and Melbourne," says Jane Smith, a seasoned mortgage broker.

Saving for a Deposit in the Current Market

Most lenders require a deposit of at least 5-20%. A common target is 20%, which also helps avoid Lenders Mortgage Insurance (LMI)—a premium paid when the deposit is below 20%.

Challenges:

• Higher house prices mean larger deposits
• Slow wage growth limits savings rates
• Rising living costs reduce disposable income

Tips:

• Start saving early—open a dedicated home deposit account
• Use government savings schemes like the First Home Super Saver Scheme (FHSS)
• Consider gifted deposits from family, where possible

How Your Income Can Be Made More Competitive

• Document your income thoroughly: Pay slips, tax returns, and proof of savings
• Improve your credit score: Pay bills on time, reduce debts
• Increase your income: Look for additional income sources or negotiate pay raises
• Choose suitable loan products: Fixed or variable interest rates, offset accounts, or redraw facilities

Navigating the Australian Mortgage System

Here's what you need to know as a newcomer:

• Proof of identity and income: Usually recent payslips, tax documents, and bank statements
• Deposit source: Savings, gifted funds, or overseas assets converted into AUD
• Loan eligibility: Based on your income, employment stability, and property type
• Foreign investment restrictions: For non-residents and temporary visa holders, FIRB approval is required for most properties

Note: Many lenders accept overseas income if properly documented, but eligibility criteria vary.

Converting Overseas Savings and Understanding LMI

If you're bringing money from abroad:

• Convert your savings into AUD through a regulated currency exchange service
• Keep detailed records of transfers—lenders may require proof
• Be aware of exchange rate fluctuations and transfer fees

LMI is a premium paid when borrowing more than 80% of the property's value. It protects lenders, not borrowers, and can add thousands to your upfront costs. Some lenders waive LMI for certain first-home buyer schemes or when the deposit exceeds 20%.

Strategies for International Buyers

• Timing your purchase: Market conditions and currency rates can influence affordability
• Visa requirements: Usually, a minimum stay or residency status is needed to purchase property
• Understanding the FIRB rules: Non-residents often need approval and may face restrictions on the type of property they can buy

Real Numbers and Timelines

Suppose you are an overseas buyer with AUD 50,000 saved and a yearly income of AUD 100,000. Buying a property worth AUD 800,000 could require:

• A deposit of AUD 160,000 (20%)
• Additional costs like LMI, stamp duty, legal fees, totaling approx. AUD 50,000

Achieving this might take 4-5 years if you save AUD 20,000 annually and invest wisely.

Final Thoughts

While rising house prices outpace wage growth, options remain. Smart planning, informed decisions, and understanding the Australian housing finance system can help you build wealth and secure your future.

Remember, every financial journey is unique. Whether you're a first-time buyer or an experienced investor, staying informed and adaptable is key. Consult with experienced mortgage advisers and financial planners to tailor strategies suited to your circumstances.

"Your housing power depends on more than just income—it’s about your financial plan, timing, and understanding the market."