Housing affordability around the capital cities

First home buyers and bargain hunters have been watching capital city house prices with horror, seeing the dream of home ownership slip further away. However, the capital city prices we see making headlines are often very poor reflections of the cost of housing - especially the national average which is elevated by one or two over-performing markets.

For a good example of this, CoreLogic RP Data's Property Pulse reveals that the cheapest median house value in a Sydney suburb is $839,676 - which is far above the highest median value for all other capital cities. Certain capitals are attracting large premiums, but others are still very affordable for those looking to live near the CBD.

"In the more expensive cities such as Sydney, Melbourne, Darwin and Canberra it has become difficult to secure houses close to the city at relatively affordable prices. Given buyers are willing to pay an entry level premium – we anticipate this trend will continue over the coming years," said Cameron Kusher of CoreLogic in a 23 April statement.

The challenge of finding affordable homes for sale

According to the Australian Housing and Urban Research Institute, between 1960 and 2006 real house prices have increased by an average of 2.7 per cent per year, while incomes have only risen by 1.9 per cent per annum over the same length of time.

This creates a challenge for the young and aspiring Australian home buyer today: Finding a location where the price of houses for sale hasn't outstripped earning capacity. And contrary to popular belief, there are quite a few good spots out there.

CoreLogic RP Data's figures show that within ten kilometres of the Brisbane CBD, the suburbs of Rocklea, Keperra and Tingalpa offer median house prices between $353,030 and $478,686. Units in Holland Park West and Gordon Park have median prices of $347,010 and $347,497 respectively.

If you want to live in a capital city and spend less than $200,000, Hobart is your only option. Expand your price range to $300,000 and you can look at Perth and Adelaide. And for not much more, units in Darwin, Brisbane and Melbourne become a possibility.

With a budget of $600,000 you could afford a house within ten kilometres of Melbourne's CBD in Bellfield or Maidstone, or a unit in any of the top 5 bargain suburbs for real estate in Sydney.

Wages up on average

While the average wage increase of 1.9 per cent between 1960 and 2006 may sound like a drop in the bucket, recent stats show much more promising results. The latest salary statistics from the Australian Bureau of Statistics (ABS) show a growth of 2.5 per cent over 2014 - far above the average for the previous decades.

In comparison, SQM Research figures show that national house prices have only grown by 1.4 per cent over the 12 months to 21 April 2015. Units have only increased in value by 0.9 per cent.

The capital city average is far higher at 4.6 per cent for houses for sale and 6.2 per cent for units, but again, this is stacked up by only a couple markets. Aside from Sydney and houses in Melbourne, all other real estate markets have grown at a rate lower than the reported increase in wages over 2014.

This good be good news for those who thought it was all doom and gloom for real estate in Australia. The affordability of homes for sale could become less and less of an issue if property continues to moderate and earnings rise at their current pace.

According to the ABS, wage increases have been stable for three quarters in a row, which could be the start of good things to come for first home buyers across the country.