It takes a first home buyer almost 11.5 years to save a 20 per cent deposit for an average priced home.
And as of March 2022, the national median dwelling value was estimated to be eight-and-a-half times the median annual household income level nationally.
This is a record high according to CoreLogic's latest housing affordability report and has increased from 6.8 since the onset of COVID-19 two years prior.
CoreLogic bases its modelling on a national median home value of $750,000 and Australian National University (ANU) income data which assumes an average of about $86,000.
Its Australian head of research Eliza Owen says while house prices are expected to fall nationally as interest rates continue to rise, that won't necessarily improve affordability.
Falling house prices is not something that first home buyer Tarryn Hendry considered when she purchased her Brisbane property earlier this year.
It took her and her partner years to save and find a suitable property, and when they finally broke into the market, they had to spend $200,000 over their budget.
CoreLogic says from the end of September 2020, through to the end of March 2022, Australian home values saw an "extraordinary upswing".
During this period, house prices increased 27.8 per cent across Australian capital cities.
"We started with a cost range [budget of] $550,000 to $600,000, and then we ended up purchasing a place that was that $200,000 over that," Ms Hendry tells ABC News.
"We're getting priced out … there was huge competition.
The cost of servicing mortgage repayments is now above the decade average
CoreLogic says the portion of household income to service new mortgage repayments sat at 41.4 per cent nationally in March 2022, above the decade average of 36.5 per cent.
"This was the third consecutive increase at the national level, with higher average mortgage rates and property values contributing to the uplift," CoreLogic's report said.
The report suggests that in a higher interest rate environment, mortgage serviceability will become more challenging, not only tipping more Australians into mortgage stress, but also making it harder for first home buyers to get a loan they can service.
At the same time, rents are also rising, denting the ability of young people to save for a deposit.
At the national level, the portion of household income now required to service rent on a new lease increased to 30.6 per cent, up from 29.8 per cent in December 2021, and 28.5 per cent in the March quarter of 2020.
The report says rental affordability conditions vary markedly between regions.
"Relatively weak rental market conditions across Sydney and Melbourne, especially across the unit sector through the first year of the pandemic, meant the level of income required to service rent on a new lease has actually fallen in these cities since March 2020," it said.
Higher interest rates, falling home values, need to be considered before buying property
Most big four bank economists expect more rate hikes to come.
CBA expects the cash rate to lift to 1.60 per cent by February 2023, Westpac and ANZ expect it will reach 2.25 per cent by May 2023, while NAB thinks it will hit 2.60 per cent by August 2024.
Economists are also predicting home values to fall between 5 and 20 per cent over the next two years.
Ms Owen says assuming a 15 per cent property price decline and a mortgage rate of almost 5 per cent (variable rate, assuming the cash rate lifts to 2.25 per cent) "you save on the deposit, but you spend more over the life of the loan".
"Weighing up higher interest costs with lower prices should be a key consideration for first home buyers," Ms Owen says.
ANZ's head of home loans John Campbell said there was a cohort of customers that had borrowed six or more times their income that could tip into mortgage stress as interest rates rise.
He urged them to speak to the bank if they fall into trouble, "so we can see what we can do to help".
The deposit hurdle for first home buyers
CoreLogic's report notes that one of the most significant barriers to home ownership in Australia is the upfront costs for first home buyers, which includes the deposit hurdle.
It said in March 2022 a 20 per cent deposit for the current median dwelling value across Australia was $147,795.
"Assuming a household income savings rate of 15 per cent annually, this puts the current time estimated to save a 20 per cent deposit at 11.4 years nationally, a record high," the report said.
"Looking at the back series of this metric, which extends to 2001, this is the fastest uplift in the metric over a two-year period on record.
"It highlights the speed at which home values have risen through the current upswing, in which annual growth rates have been at their highest since the 1980s."
Ms Hendry says housing affordability has been dire for some years and is getting worse as wages are not rising in line with inflation.
She worries about mortgage serviceability if rates rises and house prices fall but her income doesn't change.
"Wage growth does need to follow," she says.
