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Is your home earning more than you?

06 December 2022

In 2021, the average house's value grew by 23%, meaning your house may have made more money than you did.


It's no secret that home prices surged during the pandemic. That means that in many areas home values have increased by more than an average person earns in a year.

From February 2020 to the peak in March this year, home prices around Australia grew by an average of 35%, according to the Prop Track home price index. In 2021 alone, prices grew 23%, which represents the third fastest year of home price growth in 140 years.

That strong growth in prices means, that in many parts of the country, home values have increased by so much that the increases outstrip what a typical person earns in a year.

To put that in some context. Average annual earnings for a full-time adult are around $95,000 a year according to ABS data, and once we account for the fact that many people don't work full-time, average earnings are more like $70,000 a year. And of course, average earnings are just that. They're an average and earnings differ across different parts of the country.

When we look at areas where we've seen the increase in home values outstrip average wages by the most, there's two trends that stick out. First, many of these areas are places with very expensive homes. This is places like Sydney's inner Eastern suburbs or Northern beaches and Sorrento and Portsea in Melbourne. These are areas that have seen fast growth in home prices across the pandemic, but they're also areas where, because of their very expensive homes, they've seen big dollar increases in home values.

The other trends that stands out is that highly sought after regional areas have also been more likely to see their home values increasing by more than typical incomes. This is the case in places like the Gold and Sunshine coasts in Queensland and Byron Bay in New South Wales. These are areas that many people have wanted to move to and prices have increased substantially as a result.

There are also areas, that historically, haven't been as high income as some inner city areas and while those increases in home values is good news for existing homeowners in these regional areas, it also highlights the difficulty for existing residents that are competing with new buyers coming in from cities on higher incomes.

This coming year looks set to be a bit different. Home prices are now falling in basically all parts of the country on the back of brisk interest rate rises from the RBA. Since March, prices nationally have fallen 3.4% and with further rate rises likely to come, home prices will keep falling through the rest of this year and probably into next year. But even so prices are likely to stay well above where they were pre-pandemic, given how quickly prices rose over that period. And importantly we're likely to start to see wages growth pick up given how low the unemployment rate remains.

Speak to a home loan specialist