Meet “John” and “Jane”. With two kids and an average gross household income of $2935 each week, they’re Melbourne’s average family.

Their kids are between five and 14 and they’re looking to buy a house and stay in Melbourne.

We’ve used Australian Bureau of Statistics figures to calculate what Melbourne’s average family could borrow, and what that would unlock in the city’s property market.

Each week, John and Jane spend $2086 on household expenses – that includes recreation, food, bills, education. Of that, $312 is for housing – mortgage or rent.

But unless they substantially cut down on their everyday spending, they would only be able to borrow $283,700 to get onto the property ladder, according to the Commonwealth Bank’s mortgage calculator.

If they spent less on recreation and leisure, they could potentially borrow $468,300. With a $50,000 deposit, they could then afford to buy a $500,000 property, with some buffer money for any legal costs.

A family looking to buy within 10 kilometres of the city for under half a million may be able to find a three-bedroom apartment in a high-rise building in the inner west for about $480,000 to $500,000, or squeeze into a two bedroom unit.

It’s a situation many families are grappling with as house prices continue to skyrocket and wages don’t keep pace.

An analysis of Domain Group listings showed three-bedroom properties within 15 kilometres of the city and under $500,000 – the maximum amount a Victorian family on an average income could afford – were scarce.

In the east, there was just one property, in Box Hill South, that was listed between $500,000 and $550,000 – a bit of a stretch for John and Jane’s budget. There were more options in the north and west – Reservoir, Pascoe Vale, Sunshine West and Albion each had two or three listings that met the criteria.

Current Domain listings showed only four established properties within 10 kilometres of the city at the same price point – none were cheaper.

Experts say it’s this forcing people to compromise on what they need.

“You do get some families who are less particular about every child having their own bedroom or having a backyard,” buyers’ advocate Cate Bakos said.

“If you were OK with a two-bedroom apartment and you had one child or children sharing a room, that could be a lifestyle you could enjoy.”

In the middle ring, suburbs in the outer north such as Broadmeadows and Thomastown offered larger units and townhouses – but freestanding homes were still hard to come by. City commuters would face a 30-plus minute train ride from these suburbs or a drive that included toll fees of $7.90 per day.

The best bet for a freestanding house was on the fringes in suburbs such as Tarneit, Mernda and Cranbourne where they could buy a three- to four-bedroom home for under $500,000.

Though these homes are more affordable, they come with other costs including fewer job opportunities and longer, more expensive commutes, Grattan Institute chief executive John Daley said.

“We do know that long commutes are really bad for you,” Mr Daley said. “It reduces life expectancy and it reduces life satisfaction.”

He said many two-income families who have long daily commutes find the logistics of child care and school pick-ups too difficult to manage.

“So what we do see as a consequence of that is much lower rates of female workforce participation in the outer suburbs,” he said.

Ms Bakos said another consideration families should make was the school zone their house sits in, and that regional areas such as Ballarat, Bendigo and Geelong may be better options than outer Melbourne suburbs.

“I think a lot of people will find that the regions have some pretty exciting surprises in store when you compare school fees on high-quality private schools,” she said.

Council to Homeless Persons deputy chief executive Kate Colvin said even if families could afford the mortgage, many on an average wage would not be able to save the deposit for a $500,000 house, due to the high cost of rent.

“We need more affordable rental housing because it makes it easier for people to save while trying to move into home ownership,” Ms Colvin said.

Mr Daley said the issue was a lack of supply of mixed density housing in the inner and middle suburbs.

“You can take a 750 square metre block – and there’s many of those in Melbourne – and easily turn that into four three-bedroom apartments,” he said.

He said home owners in the inner-suburbs needed to be open to more density in their neighbourhoods.

“If they don’t accept that then the reality is their children are going to be living a very, very long way away – and good luck seeing the grandchildren!”