Australian property market rises twice as fast as wages over a decade

National house prices would need to fall by about 20 per cent to offset the rise in interest rates, Owen said. The national median house price is down 7 per cent year-to-date.


St George Bank chief economist Besa Deda said wages had been on a downward trend for much of the past decade, while property prices rose on the back of strong population growth and low interest rates.

Wage growth is now picking up from very low levels amid a tight labor market, and she expects wage growth to continue, helping those facing higher mortgage costs and potential buyers. She predicts that prices will continue to fall even as interest rates rise.

“It won’t stop dwelling prices from falling … but I think it will certainly help keep them down and it will minimize the [mortgage] There is stress in the family,” she said.

Deda noted that despite wage growth, buyers are being pushed towards more affordable properties as they face reduced borrowing power, mortgages and rising cost of living. She expects the condo market to be more resilient as a result.

Sydney mortgage broker Anthony Landahl said credit demand had eased over the past year but appeared to be stabilizing.

Buyers are bucking the brunt of rapid rate hikes, and those with good jobs and savings are more willing to trade in a declining market.

“It will take a while [to buy] Because inventory levels are low, they are often able to buy properties within their budget at significantly reduced prices,” said Landahl, managing director of Equilibria Finance.

Landahl added that a strong job market and savings buffers built up during the pandemic are helping borrowers cope with increased mortgage repayments, as well as the option to refinance at more competitive rates if needed.

Wage growth should also help limit mortgage stress when a large number of borrowers cancel their fixed mortgage rates next year.

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