A couple working full-time on Sydney’s average household income now finds themselves priced out of most house markets within commuting distance of the city centre. Financial modelling of the city’s affordability shows a stark division between areas where housing remains attainable and others where buying a home increasingly depends on financial assistance or prioritising home ownership over other needs.
This divide is driven by a stagnant housing supply and consistent population growth. Economists and urban planners highlight restrictive council zoning, low-density planning policies and community opposition to development as major obstacles in providing affordable housing close to employment centres and basic infrastructure. As a result, housing demand has steadily outstripped supply, pushing property prices beyond the reach of many median-income earners.
Based on recent financial analysis, a Sydney couple with a 20% deposit and no dependants could borrow around $1.175 million, allocating 30% of their income to mortgage repayments, which is typically the point where financial stress begins. Just 28% of the city’s 160 housing markets fall within this borrowing threshold. The closest affordable suburbs lie at least 30 kilometres west of the CBD. Most affordable options are now found on the city’s outer edge, the Blue Mountains and the Central Coast.
Affordable housing was once more accessible near the CBD. In 1994, nearly one in three suburbs within 10 kilometres of central Sydney were within reach for average earners. Today, that's no longer the case for standalone houses. While many unit markets are still affordable, they often lack the size and long-term value that families and long-term buyers are looking for.
Structural inequality further deepens the crisis. Long-time property owners can leverage capital gains to move up in the market. In contrast, renters and first-home buyers with no financial backing face limited options, with many unable to enter the market at all. This highlights how the affordability gap is locking out entire generations.
Competition in lower-priced markets has escalated, fuelled by the federal government’s 5% deposit scheme. This initiative has pushed up prices in suburbs that once offered better value for money. In the past year alone, residential land values have risen by 4.7%, with the largest increases in western areas such as Penrith and Fairfield.
Across the country, the average Sydney home now costs 12.5 times the pre-tax average household income, far beyond the national average of 8.9. Saving for a deposit in Sydney takes around 16.7 years, and monthly mortgage payments consume roughly 68.1% of the average household's earnings. For single-income households, retirees or renters, home ownership is even further out of reach due to the lack of affordable options.
The NSW government has launched policies to encourage higher-density developments in high-demand areas, moving the emphasis away from further outer-suburban growth and focusing instead on more centralised housing. However, several wealthier councils continue to resist these policies, citing concerns about infrastructure and heritage. While some councils have suggested alternative density plans, others like Mosman and Woollahra remain openly opposed.
Urban planning officials have designated eastern Sydney to accommodate 41% of all new housing projects, up from earlier strategies that had placed responsibility for only 22% on this region. The aim is to connect new housing developments to existing transport and job networks. A recent uptick in planning application activity suggests that these policy shifts may be starting to have some impact.
Despite these changes, critics argue that high construction costs and profit-driven development limit the creation of truly affordable housing. Developers frequently favour premium builds, leaving most of the new housing out of reach for average earners. For many people living in Sydney, especially those hoping to buy close to where they work or grew up, the possibility of home ownership remains a distant goal unless broader reforms accelerate supply and challenge outdated zoning practices.
