Sam Green, 11 June, 2019
The average Australian full-time wage is currently $81,843, this is calculated by totalling all the salary income earned by Australians and dividing it by the number of workers. If this seems quite high to you, it is because this number is inflated by a few Australians earning very large full-time salaries, and the fact that part time workers are excluded from the calculation.
Perhaps a better way of gauging how much most Australians get paid is by looking at the median salary – which is the salary of the person that is exactly halfway between the lowest paid person and the highest paid person – by this methodology, the median Australian way is $55,063.
Regardless of what an individual earns, what is likely is that banks will be reducing the amount of money that you can borrow, due to changes in “home expenditure measures” (HEM) likely to be caused by the outcome of the royal commission.
Currently the banks can asses a family of four of having a very basic HEM of $32,400 per year, below the old aged pension for a couple. UBS analysts believe that a far more accurate benchmark would be around $58,200 in HEM for a family of four per year.
By increasing the estimates living expenses, the amount you can borrow from a bank mortgage will drop:
Assuming a family of four has two incomes, and is looking to purchase a home, were they to be in the exact middle of Australian workers, they would have a combined income of around $110,000 per year; which would allow them to borrow around $380,000 in a mortgage from a bank under a higher HEM, such as suggested by the Hayne Royal Commission.
Assuming this family had been able to save for a 20 percent deposit, that would give them a $475,000 budget to buy a house. At present, there is not a single capital in Australia where a two-income family earning the median wage, with a 20 percent deposit that can afford a median priced house:
In Melbourne and Sydney, such a family cannot even afford a median priced apartment. The situation is also far worse for individuals, and worse again for single income families. Given the high levels of housing cost relative to incomes, it is investors and existing property owners who are dominating the property market, as opposed to first home buyers:
Using data from the 2016 census, the Grattan institute has shown that these conditions are causing home ownership rates to fall amongst all but the over 65+ Australian (i.e. salary earners):
Given this is the case, it is unsurprising to me that some salary earners do not want their tax dollars to be spent subsidising the housing investments of negatively geared property investors.