Buying a house in the 80s versus today

Introduction

“Boomers had it better”, young Australians often say. Homes were much cheaper in the past. It didn’t take half your life to save a deposit. And they’re right. The numbers don’t lie:

The average Australian in 1984 could buy a home that cost 3.3 times their annual income. In 2023, it’s 10 times what the average person earns in a year.

While home buyers in the 80s and early 90s were hit with punishingly high interest rates, house prices were much lower. Buyers back then had to borrow less, save smaller deposits and spend less of their income on housing.

Let’s take a trip back to the housing market of 1984 to see just how different buying a house was in the 80s versus today.

Now contrast that to the situation today.

Australian home buyers today must save bigger deposits, borrow much more and face much larger repayments. This means more of their weekly income goes into housing costs today than in 1984.

Let’s break down the differences further.

Australian home buyers now borrow 10 times their annual income

With the average house price today sitting at $920,100, the average Australian needs to borrow 10 times what they earn in a year to buy a house.

The amount you need for a deposit today is much higher.

Australian buyers in 2023 now have to save much bigger deposits

Saving a deposit is one of the big challenges for home buyers in 2023. As prices have risen so much, the amount you have to save for a 20% deposit just keeps jumping up.

This is a stark contrast. In 1984, a 20% deposit was 66% of a year’s income. Today, it’s 202%.
It would take you just over 2 whole years’ of income to save the same deposit.

Home loans in 2023 are also much, much bigger

The average loan size for a borrower in 1984 was just a little over twice their annual income.
Today, the average home loan size is 6.4 times the average annual income.

Wages and property prices have both grown since the 1980s. But property prices have grown much faster than income.

So do buyers today have it better in any way than people in the 80s? There is one: interest rates.

Interest rates are much lower today

It’s an eye-watering difference. Use our home loan repayment calculator and see for yourself.

“Saving to buy a property is most definitely more challenging if you don’t have any family help whether it’s a contribution to your deposit or a place to stay for low or no rent while you save. Other struggles include finding the right property listing and then having to negotiate with seasoned real estate experts and reach agreement on what is a fair price. Getting into the market sooner will ultimately mean their ‘savings’ – or in this scenario the equity in their property – will rise faster than they will be able to save, using surplus money from their income.”

Henry Single

Director, Pivot Property Buyers

Is there no hope for first home buyers?

The situation for home buyers today is much worse than it was in 1984. There’s no way around it. But that doesn’t mean it’s impossible; it just requires more work, more creativity and more luck.

Here are some tips and strategies to help you enter the market. Some of these are basic, commonsense tips like “spend less, save more”. But others are specific property strategies that might not work for every buyer but could work for you..

A note on sources for this article

For statistics on income, property prices and average mortgage sizes in 2024, we’ve relied on several ABS reports.

Data from 1984 is harder to come by. To be consistent, we’ve tried to use comparable data sets and tried to find sources from the same month in 1984 (November). For income and mortgage figures in 1984, we used ABS reports from the time.

Historic property prices were trickier. Here we relied on academic research that looked at multiple bank and government reports to get annual median prices for each of Australia’s capital cities. The 1984 figures did not include any information about Darwin, however.
For interest rate data, we relied on the Reserve Bank’s historic statistics and Finder’s own mortgage database, which is one of the largest mortgage rate databases in the country.
Sources are listed below.

Sources