House price growth has outpaced household incomes in more than half of Sydney's suburbs, with homes in some pockets making over $1 million more than their owners.
From Bronte in the east to Richmond in the north-west, and in hundreds of suburbs in between, houses have made more money than the people who live in them, new Domain modelling shows, making it increasingly difficult for buyers to keep pace with the city's rapidly rising prices.
With the property boom following years of sluggish wage growth, house price rises outpaced the average household income in 55 per cent of NSW suburbs over the year to June, with home values increasing at more than double the rate of incomes in almost one in five suburbs.
The largest gaps were mostly seen across the eastern suburbs, northern beaches and north shore regions, with the biggest disparity in Dover Heights and Bronte – where houses made over seven times more money, outpacing household incomes by more than $1 million.
Price growth also outstripped incomes by more than $500,000 in Northbridge and Mosman on the lower north shore, Bellevue Hill in the east, the northern beaches suburbs of Seaforth, Manly and Palm Beach, and in Byron Bay – where prices jumped by almost 10 times the average income.
Sydney suburbs where house price growth outpaced incomes
SuburbAnnual change in median property priceAnnual household incomeHow much more a house earned
NSW had the highest proportion of suburbs where house price gains were higher than incomes, said Domain's chief of research and economics, Nicola Powell. She noted 18 of Australia's top 20 gaps, in dollar terms, were in the state, with the other two in Melbourne – Blairgowrie and Somers on the Mornington Peninsula.
Dr Powell said premium markets, both within cities and lifestyle coastal pockets, had led the way for price rises, resulting in the largest gap between house price growth and wages.
While the rapid rises may be good news for those already in the market, it's making it virtually impossible for first-home buyers and upsizers to keep pace with property rises.
Good income earners were increasingly forced to look further afield, she said, noting many eastern suburbs buyers had been flocking to the northern beaches during the pandemic, pushing prices higher there.
However, it's not just the city's most expensive suburbs which are seeing house price growth outstrip local incomes.
Suburbs like Belmore and Campsie in the Canterbury Bankstown region, Fairfield in the south-west and Richmond in the west – all with house prices below Sydney's $1.41 million median – were among the areas where prices grew by at least twice the rate of annual incomes.
Just to keep a 20 per cent deposit in line with price growth over the past year, the average Belmore household needed to save 97 per cent of their income.
The Catch-22 for buyers in the current market, Mr Edge said, was that prices could get further away from them the longer they spent saving, as price growth was so far ahead of what the average Australian could earn.
Buyers across the city had a better chance of keeping up with unit growth, which had lagged behind house price growth over the pandemic and offered greater opportunities for first-home buyers unable to keep pace with escalating house prices, Dr Powell said.
Still, median apartment price growth outpaced incomes across almost 12 per cent of the suburbs, with the greatest difference seen in Milsons Point on the lower north shore, where unit growth over the year outstripped incomes by $329,633.
Rose Bay, Fairlight, Terrigal and Coffs Harbour were among a string of other coastal suburbs in Sydney and along the NSW coast, where apartments outearned local households.
Economist Stephen Koukoulas, of Market Economics, said record-low interest rates, relatively easy access to credit, government incentives and increased savings for those in secure jobs had driven up prices at a time of sluggish wage growth.
While the price rises were good news for homeowners and the broader economy – with the wealth effect likely to boost consumer spending post-lockdown – it was unsustainable, particularly with wage growth set to be subdued for some time.
Mr Koukoulas said he had been optimistic for greater wage growth this year, off the back of skill shortages and the unemployment rate falling below 5 per cent, but this did not show in the latest figures. The wage price index increased by a less-than-expected 0.4 per cent in the June quarter.
Even if wages were to start lifting again next year, he said he expected the housing market was topping out, and noted future interest rate hikes and increased housing supply while borders remained closed would likely dampen property price growth.
* Source Domain - Kate Burke