This house at 57 Ebden St, Heathcote, with a $400,000-$440,000 asking range, is one example of a home that Victorian household earning $120,000 a year can likely afford.

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Victorian first-home buyers are getting priced back into the property market as the time needed to save a deposit drops.

PropTrack’s new Housing Affordability report found barely one in 10 residences across the state are within reach of households earning an average $120,000 income today.

But with values barely moving, and a rate cut expected early by the new year — they’re predicted to be able to buy a bigger share of homes, potentially in a matter of months.

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The state’s nation-leading new home construction, as well as property tax changes that have prompted vast numbers of investors to sell, are behind a home price stall.

And that combination is providing a potential blueprint to fix a wider Australian housing affordability crisis that is the worst the nation has seen in 30 years.

The report shows it now takes six years for the typical Victorian household to save a deposit for a $700,000 home, the lowest level since the early days of the Covid-19 pandemic.

The timeline blew out to almost seven years as home prices surged in 2021.

And the report also shows that nationwide, most households would need to spend at least a third of their income to pay the mortgage, the worst level since 1989.

With three bedrooms, this house at 2 Chapman Drive, Wyndham Vale, in Melbourne’s western suburbs is priced at $400,000-$440,000. It’s a home that a household earning $120,000 per year can likely afford, subject to approval and individual circumstances.

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PropTrack senior economist and report co-author Angus Moore said Victoria had done a pretty good job building homes in the past decade. Picture: Supplied.

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In Victoria the typical new loan climbed to about $605,000 across the past financial year, despite relatively flat home price growth, according to Australian Bureau of Statistics data.

It now accounts for 35 per cent of the state’s average income.

But that figure could soon be falling, with PropTrack senior economist and report co-author Angus Moore praising the state governments’ approach to housing reform and development, suggesting other states encourage more medium and higher-density homes.

“Victoria has actually done a pretty good job of building homes across the past decade or so,” Mr Moore said.

“Having more homes means the homes we do have are generally more affordable.”

About 610,000 homes were built in Victoria from 2014-2023, compared to 552,000 in NSW and 377,000 in QLD.

129 Wilson St, Horsham, has a $349,000 price tag. Households bringing home $100,000 per year can often afford a home with this price.

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The Australian Stock Exchange is predicting the Reserve Bank will cut the nation’s cash rate up to four times next year, which is expected to lead to reduced interest rates. Picture: NCA NewsWire/Andrew Henshaw.

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The Australian Stock Exchange has tipped the Reserve Bank’s first rate cut could happen as soon as February, and the economist said housing affordability could improve as a result.

“If we continue to see the sort of income growth that the RBA is expecting, and that we have seen in recent years, and interest rates start to ease, we’d hope to see affordability start to improve across Melbourne,” Mr Moore said.

The PropTrack data shows households earning a $100,000 yearly income could afford 8 per cent of the Victorian abodes listed for sale in the 2023-24 financial year, while those bringing home $120,000 could afford 13 per cent of properties and households on $140,000 could bankroll 20 per cent.

About 45 per cent of homes for sale were within reach for those earning $200,000, and almost three quarters for those making $300,000.

The Demographics Group director Simon Kuestenmacher says housing affordability in Victoria is set to improve due to the number of greenfield – meaning undeveloped – sites available to build upon. Picture: Supplied.

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A three-bedroom house at 5 Pimbit Court, Kurunjang, with a $399,000-$438,900 price range. It’s another property typical of the ones that households earning an annual $120,000 can look to buy.

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A separate report from online lenders’ directory Mortgage Broker ranked Melbourne as the nation’s second-best place to save for a home deposit, scoring it a 7.75 out of 10 — just behind Perth.

The ranking was based on a combination of rental costs, average incomes, monthly savings and the cost of living.

The Demographics Group director Simon Kuestenmacher said housing affordability in Victoria was set to improve.

“Melbourne will be relatively cheaper than other capital cities, for the simplistic reason that it can continue to sprawl like crazy,” Mr Kuestenmacher said.

“Melbourne will build heaps more greenfield sites where we build relatively cheap housing far away from the city, and that will drive down the house price ratio.”

With a $475,000-$515,000 range, this house at 1/8-10 Harmony Drive, Tarneit, is a residence that a household bringing home $150,000 could look to buy.

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Property Investment Professionals of Australia board member and buyers’ advocate Cate Bakos says competition among buyers will increase if there’s an interest-rate cut.

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Property Investment Professionals of Australia board member and buyers’ advocate Cate Bakos said the Victorian government’s land tax changes, implemented in January, had led to more property listings and supply exceeding demand.

She said that buying conditions “are a lot easier in Melbourne than other capital cities” where prices have soared.

Adelaide and Perth’s median dwelling price, combining both houses and units, surpassed Melbourne’s earlier this month.

Ms Bakos added that Victoria’s buying conditions were not as tough now as they were two years ago although inflation and the cost of living were currently impacting home seekers.

But the professional homebuyer said it could make sense to buy a home before the RBA cuts the cash rate next year to ensure less competition from other buyers.

“I think for anyone wanting to get in before the rush – and I’m confident when there’s a rate cut there will be a rush – now is a good time to buy or start looking,” she said.

“When you have more buyers than sellers, prices can go up more.”

Located in the Melton municipality, 164 Botanica Springs Blvd, Brookfield, is priced at $490,000-$539,000. A household on $160,000 a year could likely buy within this range, subject to approval.

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Melbourne-based iCare Finance mortgage broker Bass Tawil says buyers should shop around for the beats deal on their home loan.

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Melbourne-based iCare Finance mortgage broker Bass Tawil said people with the ability to buy a home should do so in the next six to 12 months.

Mr Tawil said it was important for first-home buyers to talk to a home loan expert before purchasing to discover any government assistance schemes they could be eligible for, and to approach multiple banks to ensure the best deal.

HOW MUCH OF THE VICTORIAN MARKET YOU CAN AFFORD

$100,000 — 8%

$120,000 — 13%

$140,000 — 20%

$150,000 — 23%

$160,000 — 27%

$175,000 — 32%

$180,000 — 34%

$200,000 — 45%

$250,000 — 62%

$300,000 — 74%

Tracks the share of homes for sale across Victoria in the past financial year where your household income could cover a mortgage, without going into housing stress.

Source: PropTrack Housing Affordability Report 2024

— additional reporting by Tom Bowden and Sarah Petty

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