Australia’s housing affordability has fallen to its lowest level on record, with a typical household now able to afford just 12 per cent of homes sold and mortgage repayments absorbing their largest share of income in almost four decades.
Australia’s housing affordability crisis has deepened despite recent price falls, as higher borrowing costs and years of home price growth push purchasing power to a record low.
The latest realestate.com.au Housing Affordability Report, co-authored by senior economist Angus Moore and economist Luc Redman, found a median-income household earning just over $125,000 a year could afford only 12 per cent of homes sold nationally in FY26, below the previous record low of 14 per cent recorded in FY08.
Five years earlier, when mortgage rates were at record lows, the same household could afford 43 per cent of homes sold.
The deterioration was recorded across every state, but the geography of affordability has shifted significantly. South Australia has overtaken NSW as the nation’s least affordable state overall, while Victoria has become the most affordable for the first time since realestate.com.au records began in FY95.
The report attributed much of the national decline to higher borrowing costs, after the Reserve Bank lifted rates three times in February, March and May.
Mortgage rates rose from a recent low of 5.8 per cent in FY25 to 6.3 per cent by the end of FY26. At the same time, the national median home price increased by just over 5 per cent between FY25 and FY26, outstripping estimated household income growth of 4.5 per cent.
Mr Moore said the combination had erased the modest improvement in affordability recorded a year earlier.
“The three RBA interest rate hikes made in February, March and May increased mortgage rates and further constrained household borrowing capacity amid an already difficult cost-of-living environment,” he said.
“This combination pushed affordability to a record low, as a typical-income household in FY26 could afford just 12% of homes.”
The pressure is particularly acute at the lower end of the income distribution.
A household earning $76,000 a year could afford just 2 per cent of homes sold, while one earning $65,000 could afford only 1 per cent.
The report found cheaper properties have experienced the strongest price growth since March 2020, accelerating the affordability decline for lower-income buyers. It attributed some of that pressure to first-home buyer schemes bringing demand forward at the same time as increased investor participation intensified competition for more affordable properties.
That dynamic has become increasingly significant following the expansion of the Australian Government’s 5% Deposit Scheme in October 2025.
The expansion increased price caps and removed income requirements and place quotas. The share of Australian first-home buyer loans using the scheme subsequently doubled from around 25 per cent before the expansion to around 50 per cent.
About 120,000 first-home buyer households took out a home loan during FY26.
While the report said such schemes help buyers enter the market sooner, it warned they do not improve overall housing affordability and can increase demand and prices over the longer term.
The deterioration is also showing up sharply in mortgage serviceability.
Nationally, mortgage repayments on a median-priced home reached 35.5 per cent of average household income in FY26, exceeding the 33.3 per cent peak recorded during the Global Financial Crisis and reaching the highest share since 1989, when it stood at 37.5 per cent.
The deposit hurdle has also increased. An average-income household saving 20 per cent of its income would now need the equivalent of six years to accumulate a 20 per cent deposit on a median-priced home, up from 5.8 years in FY25.
South Australia takes unwanted affordability crown
South Australia recorded the most severe affordability conditions overall, having shifted from the second-most affordable state as recently as FY22 to the least affordable in FY26.
A median-income South Australian household earning about $103,000 could afford just 7 per cent of homes sold across the state. Home prices in SA have more than doubled since the start of the pandemic, according to the report.
Mortgage servicing costs reached a record 43.9 per cent of income – the highest of any state – while an average-income household would need 7.4 years to save a 20 per cent deposit on a median-priced home, also the longest period nationally.
NSW, meanwhile, slipped to the second-least affordable state overall. A typical NSW household earning about $126,000 could afford 9 per cent of homes sold, while mortgage repayments reached 39.2 per cent of income.
The time required to save a deposit actually edged down from 6.8 to 6.7 years.
Victoria emerged as the country’s most affordable state, reflecting relatively weak home price growth in recent years, particularly in Melbourne. A median-income Victorian household earning around $127,000 could afford 16 per cent of homes sold, although that was down from 19 per cent a year earlier.
Western Australia recorded one of the sharpest reversals. A typical household earning just over $130,000 could afford 10 per cent of homes sold, down from 19 per cent a year earlier and 64 per cent at the FY20 peak.
Despite that decline, WA still had the lowest mortgage repayment burden among the states at 30.9 per cent of income and the shortest deposit-saving period at 5.2 years.
Queensland affordability also fell to a record low, with a typical-income household earning just under $124,000 able to afford only 9 per cent of homes, down from 15 per cent in FY25. Mortgage repayments on a median-priced Queensland home climbed to about 39.7 per cent of average household income, while the time to save a deposit reached a record 6.7 years.
Tasmania’s median-income household, earning about $91,000, could afford just 6 per cent of homes sold – the lowest median-income share of any state – although better affordability among higher-income Tasmanian households lifted the state’s overall ranking. Mortgage repayments reached a record 35.3 per cent of income and the deposit-saving period rose to six years.
The report said some near-term relief could emerge if home prices continue to soften, but warned that would be unlikely to fundamentally shift conditions for many prospective buyers.
“Looking ahead, affordability may improve marginally if home prices continue to soften, but this is unlikely to be a turning point for many buyers,” Mr Moore said.
“Without a meaningful increase in housing supply, affordability will remain a significant challenge, particularly for lower-income households.”
The Housing Affordability Index measures the share of home sales households across the income distribution can afford, assuming mortgage repayments equal 30 per cent of gross income, a 2.5 percentage point serviceability buffer above the most recent average new mortgage rate, and access to a 20 per cent deposit plus purchasing costs.