According to data, Melbourne is the only Australian capital city that has seen an improvement in affordability metrics over the past five years.
It might not seem that way when you look at the cost of some properties, but when you consider the lack of movement in the market and the steady growth of income, experts say Melbourne is tracking well.
“Five years ago, [Melbourne] would have been relatively expensive compared to the broader capital city market,” CoreLogic’s head of research Eliza Owen said.
“Now, it’s actually got a lower dwelling-value-to-income ratio.”
She said while Melbourne wasn’t what you would call an “affordable” or “accessible” housing market, it had seen subtle improvements in affordability over time, unlike other capital city markets.
“As we’ve come through the other side of rate rises, cost-of-living crisis, and households feeling the squeeze when it comes to trying to save for a deposit, Melbourne actually looks relatively affordable,” she said.
But how affordable is Melbourne really?
Can you afford a house in Melbourne?
According to the Australian Bureau of Statistics, in November 2023 the average weekly earning for an adult working full-time in Victoria was $1,858.10 before tax.
That equates to about $96,621 a year or roughly $74,752 after tax.
It is generally accepted that if a person spends 30 per cent or more of their income on their mortgage, they are likely to be experiencing “housing stress”.
For someone on the average Victorian wage, that’s about $22,426 or more annually.
Based on that, and by using an average interest rate of 6.18 per cent over a 30 year loan, the average single person would need to borrow less than $306,000 to avoid housing stress.
That doesn’t include the 20 per cent deposit required to avoid Lenders Mortgage Insurance.
Based on today’s inflation rates and assuming a buyer has that 20 per cent deposit, they could purchase a property up to $362,400.
Given that, and the data obtained by the ABC, a single income household of an average Victorian wage, could not comfortably afford to buy a house in any Greater Melbourne suburb.
We doubled the figures and applied the same formula to see if owning a home was more achievable for a double income household who both earn the average wage.
In this scenario, couples could purchase a house up to $733,800 — borrowing no more than $611,500 combined with a 20 per cent deposit of $122,300.
Of the hundreds of suburbs in Greater Melbourne, about 70 would be considered affordable for these households.
It is important to note we haven’t added the cost of stamp duty to these figures which can vary in Victoria from about 1.4 per cent to 6.5 per cent of the properties value.
Bruce Carr, principal of Loanscape and independent mortgage broker, said lower income earners were being squeezed out of the market.
“What I saw in the last quarter is borrowing capacity improved slightly, but the average loan size increased. So the income required to get that actually increased,” he said.
“In July 2021 a couple with annual family income of $120,000 could borrow up to $785,000. That same couple can now access a maximum $520,000.
“It’s only wealthier families that can afford to borrow the amounts required to get into the housing market.”
Where are the cheapest suburbs for a house?
The median price for a house in Greater Melbourne is currently $942,779, according to CoreLogic data.
That’s a 4.4 per cent increase on the previous year and a 30 per cent jump on prices seen in 2019.
The cheapest suburb to purchase a house is Melton, in Melbourne’s west, where the median house price is $473,074.
It’s closely followed by neighbouring Melton South.
Both of these suburbs have seen property prices fall over the last two years.
In general, Melbourne’s west remains the cheapest area to purchase a house with a median price of $699,117.
The area also includes suburbs like Brookfield, Deer Park, Hoppers Crossing, Kings Park and Wyndham Vale.
Melbourne’s north-west which includes suburbs like Coolaroo, Dallas and Campbellfield, is the next most affordable area with the median price for a house $756,176.
While slightly more expensive, Ms Owen said first-time buyers were turning to the north-east and the outer-east of Melbourne, including Belgrave and Ferntree Gully.
“This seems to be where young family buyers are able to access a detached house for much cheaper than the inner-east,” Ms Owen said.
What about the cheapest areas for an apartments and units?
Melbourne has seen a shift towards buyers looking to apartments over detached homes, which Ms Owen said could partially be put down to first homebuyers turning to the cheaper option.
“Unit sales have held up more strongly towards the start of the year with about 5,900 sales in the three months to February,” she said.
“That’s above the historic five-year average of about 5,880.”
Despite its close proximity to Melbourne’s CBD and access to transport and other services, Carlton is the cheapest suburb for an apartment, with a median value of $349,078.
While it may not necessarily be attracting families, Ms Owens said it was a good area for investors.
“We’re talking about cheap, small apartments that are relatively accessible for investors and the rent yields on them are pretty good,” she said.
“What’s interesting for [Carlton], it’s actually in positive growth territory now, the price is rising.”
She said the cheap inner-city unit market was one of the markets with more momentum.
Melton and Melton South are again within the top five cheapest suburbs if you’re in the market for an apartment, about $100,000 less than the median cost of a house in the same area.
Where are Melbourne’s most expensive suburbs?
Principal partner at SGC Economics and Planning, Marcus Spiller, said house prices were typically linked to accessibility to jobs and opportunity.
“If you live in an area that has really good access to heaps of jobs within minimum travel time, it’s very likely that your housing will be more costly,” he said.
It’s reflected in the data, with Deepdene, about 9 kilometres east of Melbourne’s CBD, topping the list for the most expensive suburb to buy a house.
The median value for a house there is $3.6 million.
It’s closely followed by Brighton, which is home to one of Melbourne’s most popular beaches. A house there could set you back about $3.4 million.
Portsea — another coastal community located down the Mornington Peninsula, also sits within the top five most-expensive suburbs, with the median house price sitting at $3.08 million.
Ms Owen said the Mornington Peninsula as a whole had seen the largest growth over the last five years, with prices rising 40 per cent.
“That comes back to things like the socio-economics of an area, how exclusive it is, often these areas are waterfront as well and that certainly has a premium in metropolitans,” she said.
The closer you get to Melbourne’s CBD, the more likely you are to pay more than $1 million for a house.
The suburb where you’ll find the most expensive apartment is Ashburton where the median price is $1.3 million.
Beaumaris is closely following its tail, a suburb that had one of the largest increases in prices over the past five years — 29.9 per cent.