Melbourne is Australia’s most affordable city during a real estate crisis

New data shows that Melbourne is by far Australia’s most affordable major city for renters and even potential home or unit buyers during a cost of living crisis.

The influx of international students and migrants hasn’t pushed up rents in the Victorian capital to the same extent as they have in Sydney.

Residents in an inner-city suburb a short tram ride from the city typically spend just 24 percent of their income on rent, compared with 43 percent in a Sydney suburb a similar distance from the CBD.

Even an average earner looking to buy a home 20km from the city has options in Melbourne without having to worry about mortgage stress, which would be impossible in Sydney.

Melbourne’s average weekly rent of $529 in August was still much cheaper than Sydney’s of $666.39, despite both cities hosting a larger proportion of new permanent and long-term arrivals from abroad.

Melbourne is by far Australia’s most affordable major city for renters and even potential home or unit buyers during a cost of living crisis, a wealth of data shows (pictured are Matildas fans in front of Flinders Street train station).

It’s also cheaper than the equivalent Brisbane apartment rent of $544.72 in a city that sees a larger proportion of interstate migration, data from SQM Research showed.

However, when comparing rents for specific suburbs to the median household income from the 2021 census, Melbourne is by far the cheapest place to rent in the inner city, despite a rise of more than 20 percent over the past year.

Gentrified inner-city areas were particularly affordable for working professionals who typically make more money.

SQM Research chief executive and founder Louis Christopher said that unlike Sydney, Melbourne has built high density of new housing close to the city center in places like Docklands and Southbank, meaning there is an influx of new residents more affordable prices.

“Over the long term, Melbourne has been more successful than Sydney in expanding the market,” he told Daily Mail Australia.

“There’s a larger number of densely populated apartments that have managed to accommodate a lot of students in Melbourne – you don’t really have that in Sydney.”

In Carlton North, the median apartment rent was $573 per week in a suburb where $2,400 is the median household income.

That means rent eats up 24 per cent of income, which is still below the Australian Bureau of Statistics’ 30 per cent threshold for rent stress.

In fact, rents in the 3054 ZIP Code are cheaper than they were in February 2020, just before the pandemic, when renters in a suburb 4 km from downtown were paying $693 a week.

Sydney is significantly more expensive when comparing average weekly rent to median suburban household income from 2021 census data.

Zetland, south of the city, is a similar distance from the city center as Carlton North is from Melbourne CBD.

Average rents here are a very expensive $949 in a suburb where the median weekly household income is $2,192.

Someone living in the 2017 ZIP code would most likely experience rent stress as a lease eats up 43 percent of income.

In Carlton North, the median apartment rent was $573 per week in a suburb where $2,400 is the median household income. That means rent eats up 24 per cent of income, which is still below the Australian Bureau of Statistics’ 30 per cent threshold for rent stress

In Brisbane, Dutton Park, 4km south of the city center, has a median weekly rent of $608 in a suburban setting with a typical household income of $1,739.

Rent in the 4102 ZIP Code would account for 35 percent of household income.

The average full-time worker earning $95,581 a year also has more opportunities to buy a home or unit without getting into mortgage stress, meaning if they owe the bank at least six times their earnings.

Broadmeadows, 14 miles north of the city, has an average home price of $571,184, well below the median of $923,881 for the greater Melbourne area, CoreLogic data showed.

With a 20 percent deposit of $114,237, the average worker with a $456,947 mortgage would have a manageable debt-to-income ratio of 4.8.

Someone looking for an apartment in a desirable location near the water can try St Kilda, 7km from the city, where the median is $537,922, a level below the greater Melbourne area median unit price of $603,829 U.S. dollar.

That would be impossible in Sydney, where houses and units are expensive for the average wage earner to buy themselves.

A home in Bankstown, 14 miles south-west of the city, typically costs $1,287,980, below the Greater Sydney median of $1.334 million.

An average-earning worker with a $257,596 deposit and a $1.030 million mortgage would have a dangerous debt-to-income ratio of 10.8.

A combined income of $171,731 would be required to fall below the “six” threshold for mortgage stress in a city.

Housing close to the city or the water is also expensive in Sydney.

Someone looking for an apartment in a desirable location near the water can try St Kilda, 7 km from Melbourne city centre, where the average is $537,922

Hillsdale, a less hip suburb between the airport and Maroubra Beach, has a median home price of $741,060, which is lower than the median price of $817,059 in the greater Sydney area.

With a 20 percent mortgage deposit of $148,212, a mortgage of $592,848 would result in a debt-to-income ratio of 6.2, putting it in the stressed category.

In the far south of Brisbane there are suburbs with average property prices under US$600,000 including Browns Plains, 28 km from the city where the average price is US$556,302.

This is well below the $819,932 in Greater Brisbane.

Units near the Brisbane River and the city are still affordable, with South Brisbane having an average unit price of $591,314, which is higher than the city’s median of $520,346.

The Reserve Bank of Australia’s 12 rate hikes since May 2022 have had less of an impact in Melbourne, as prices have not risen to the same extent during the pandemic as they have in Sydney and Brisbane, when cash rates were at a record low of 0.1 per cent.

Labor Prime Minister Daniel Andrews also had the world’s longest lockdowns in Melbourne: strict restrictions applied for 246 days, which is why people left Victoria for Queensland.

“The evidence strongly suggests that there has been an outflow of interstate migration out of Victoria – during the Covid-19 crisis the situation really started to escalate,” said Christopher.

“In absolute terms, Melbourne rents have risen, Melbourne property prices have risen, just not as much as Sydney – there has been more supply in the Melbourne housing market.”