Perth housing crisis: Reality bites for first home buyers with grim market outlook for respectable incomes

First home buyers chasing the Great Australian dream are facing a grim reality check, with thousands fighting over little more than 100 properties in their price range. Caught amid a perfect storm of tight lending conditions, high interest rates, record low listings and inflated house prices, the typical first home buyer can borrow only enough for a one or two bedroom flat in the metropolitan area. Mortgage Choice broker Mark Wilkins said that buyers earning $60,000 a year, with no debts or dependents, can borrow only $315,000. With a 5 per cent deposit adding about $15,000 to buying power, these buyers currently have access to only 13 listings in the metropolitan area - mostly one bedroom units as small as 29sqm and some without a car bay. “It is extremely hard for someone on a single income in the current market to purchase anything other than a one-bedroom apartment unless they are prepared to live more than an hour away from the CBD,” said Mr Wilkins, from the Wembley branch. He said a buyer on $80,000 a year can borrow $430,000 - with total buying power at about $450,000 when combined with a 5 per cent deposit, opening access to only 30 current listings. Someone on $100,000 a year can borrow $540,000, paying up to $567,000 combined with the minimum deposit. There are only 69 local properties listed for sale between $450,000 and $550,000. The dire situation means thousands of first home buyers - and thousands more investors - are currently fighting over just over 112 properties in the metropolitan market. New Domain data shows first home buyers pay about $780,000 for an entry-level house, which is up 22 per cent since December last year, and more than double the 2020 average of $379,000. Recent first time buyer Sabrina McCarthy, 29, described her property journey as “devastating” and “heart-breaking”. The events coordinator said she had fulfilled the social contract that had helped earlier generations buy a house - by getting getting a university degree, diligently working up the career ladder, saving hard and eventually landing a well-paying professional job. But when she last year sought to get a loan, she was frustrated she could only afford a small unit in a fringe suburb. While she was able to borrow up to $520,000, she said she could not have coped with repayments absorbing two thirds of her salary, opting instead for a $470,000 two-bedroom unit in Midland. She said her parents were disappointed for her, after watching her struggle to achieve her dream of buying an inner city home. Back in the 1990s, they had been able to buy a house and land package for less than her deposit. “I am first generation Australian,” she explained. “My parents came out here to give their children better lives and opportunities. They thought that it’s Australia, it’s the land of opportunity. “(T)hey could not fathom why I had to get the home that I had to get.” Ms McCarthy said she watched prices jump by at least $50,000 on the back of the 5 per cent deposit scheme. The market was further fuelled by investors, making offers in person, through buyers’ agents and on the phone. “I felt like I was trying to fight ghosts I couldn’t see - they were everywhere,” she said. First home buyers Felix Shackleton and Nikita Delaney backed calls for the Federal Government to consider tax changes to de-incentivise investors from the market. The pair said cashed-up investors were competing against first home buyers, comprising about a third of all groups at every property they inspected. Dr Shackleton called for changes to either negative gearing or the capital tax gains - both of which are reportedly being considered ahead of the May Budget. While Dr Shackleton and Ms Delaney enjoy decent wages in their jobs in medicine and physiotherapy, they said their buying options remain severely restricted under Perth’s record low listings and high prices. They had initially hoped to remain under the $850,000 limit for the 5 per cent deposit scheme, but say the cap is impossible as they want to buy near family and friends in the Bicton area. According to Mortgage Choice, first home buyers paying above $850,000 must have a 20 per cent deposit, or pay about $30,000 in Lenders Mortgage Insurance and the concessional rate of stamp duty. Couples with a combined income of $160,000 ($80,000 each) can borrow about $870,000, while a couple with a combined income of $200,000 ($100,000 each) can borrow about $1.1 million.