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With housing affordability continuing to challenge Australian buyers, new research has found that couples in Far West and the Orana (FWO) can get significantly more for their money than buyers in many other parts of the country, according to mortgage broking experts AFMS Group.
The Group's latest Borrowing Gap Report ranked FWO as the fifth most affordable region nationally for couples looking to buy a house, with a median house price of $409,682, while also ranking 80th out of 87 regions for borrowing power itself, demonstrating how lower property prices can make a significant difference to what buyers can actually afford.
AFMS Group assessed five hypothetical borrower profiles across a panel of ten lenders, comparing estimated borrowing capacities against median house prices across Australia's 87 statistical regions to identify where buyers can get the most home for their money.
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More purchasing power than Sydney
The findings highlight the stark difference between regional and metropolitan property markets, with couples in FWO having significantly more purchasing power than those in Sydney's most expensive areas.
While FWO couples can afford houses in 100 per cent of suburbs, those buying in Sydney's Eastern Suburbs can afford houses in 0 per cent of suburbs analysed, where the median house price reaches $3,788,420.
The gap is also clear when looking at borrowing power relative to local property prices. A couple's estimated borrowing capacity in FWO is equivalent to 2.53 times the regional median house price, compared with just 0.39 times in Sydney's Eastern Suburbs.
This suggests that where buyers choose to live can have a greater impact on what their borrowing power can buy than their income alone.
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How far can buyers' borrowing power stretch?
Purchasing power also differs between single buyers and couples, the report revealed, highlighting the advantage of having two incomes when entering the property market.
Across FWO, a single buyer has estimated borrowing power equivalent to 1.32 times the regional median house price, compared with 2.53 times for a couple.
Regional affordability does not necessarily mean buyers have greater borrowing capacity, however. FWO ranked 80th nationally for borrowing power, but fifth for how far that borrowing power goes against local house prices.
Property prices vary significantly across Australia than regional incomes, meaning buyers in lower-priced markets can often afford a greater proportion of the local housing market.
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What's affecting Australians' borrowing power?
The AFMS Group report also examined how everyday financial commitments can influence how much buyers are able to borrow. For a median full-time earner on $95,000, the research found:
• Two children could reduce borrowing power by $120,000, making it harder for growing families to secure a larger home.
• An unused $20,000 credit card limit could reduce borrowing power by $100,000, even if the card has no outstanding balance.
• A $650 monthly car loan could reduce borrowing power by $85,000.
• A $400 monthly personal loan could reduce borrowing power by $55,000.
• A $30,000 HELP debt could reduce borrowing power by $50,000.
The findings suggest buyers may have more control over their borrowing capacity than they realise, with existing financial commitments potentially making a significant difference to how much they can borrow.
Andrew Hadjidemetri, AFMS Group's principal mortgage broker and founder, said buyers should understand their borrowing position before applying for a home loan.
“Borrowing power is about much more than your salary and deposit," he explained.
"An unused credit card, car loan or other commitments can significantly affect what a lender will offer.
"I’d encourage buyers to understand their borrowing position before they start looking at properties, rather than finding a home first and trying to make the numbers work afterwards.
"It's also important to remember that your maximum borrowing capacity is not necessarily what you should spend."
He said that some factors affecting borrowing power can be changed, like reducing a commitment, reviewing credit card limits, or looking at different lenders and deposit options, and indicated mortgage brokers can help buyers understand the full picture and compare their options.
For buyers considering entering the market, reviewing existing financial commitments and understanding how different lenders assess applications could help them get a clearer picture of their options, he concluded.
To read the full Borrowing Gap Report, visit: www.afmsgroup.com.au/borrowing-gap-report/.