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Housing affordability at the lowest level since 2008

Housing affordability continues to worsen across Australia with new data showing it now takes 45.9 per cent of a household’s income to meet average loan requirements.

The Real Estate Institute of Australia’s (REIA) Housing Affordability Report (HAR) found housing affordability was the worst in NSW, where it takes 56 per cent of a household’s income to service a loan, followed by Victoria (46.5 per cent), Tasmania (43.5 per cent), Queensland (42.4 per cent), South Australia (42.1 per cent), Western Australia (35 per cent), ACT (34.8 per cent) and the Northern Territory (34.4 per cent).

REIA President Hayden Groves said housing affordability, or median income-to-home-loan-ratio, declined in all states and territories in the June quarter except Victoria.

“The reality is that homeowners with a mortgage continued to be challenged by increased interest rates with again, the lowest affordability on record since 2008,” Mr Groves said.

Source: REIA

According to the report, rental affordability was also a challenge for tenants.

“Rental affordability declined, with the proportion of income required to meet median rent nationally increasing by 0.3 percentage points to 23.3 per cent,” Mr Groves said.

“It is no doubt a challenging time for renters – mostly driven to a fundamental lack of rental availability, but it is important to note that rental affordability didn’t further worsen significantly over the June quarter.

“While rental affordability declined in the larger states of NSW, Victoria, Queensland and in Western Australia, it improved in the other states and territories.”

Tasmania remains the most unaffordable state to rent in with the rent-to-income ratio sitting at 27.3 per cent, followed by NSW (27 per cent), the Northern Territory (25.5 per cent), South Australia (23.5 per cent), Queensland (21.5 per cent), Western Australia (22 per cent), Victoria (20.1 per cent) and the ACT (19.7 per cent).

Source: REIA

Mr Grove said that since the previous reporting period, there has been a chaotic campaign to introduce rent freezes and rent controls by political stakeholders. 

“National Cabinet, to their credit, have listened to the economic arguments and decided against overly dramatic market intervention,” he said.

Despite the unaffordability of housing across the country, there are some green shoots appearing for first-home buyers, according to Mr Groves.

“Thankfully, signs of first-time buyers gaining back confidence have emerged this HAR,” he said.

“The number of first home buyers increased to 24,768 nationally, an increase of 17.1 per cent during the quarter but a decrease of 15.0 per cent compared to the June quarter of 2022.

“The average loan size nationally to first home buyers increased to $492,587. This was an increase of 2.6 per cent over the quarter and of 2.7 per cent over the past twelve months.”

Mr Groves said when it comes to housing it is important to put current conditions in context.

“When Australians are suffering under cost-of-living pressures, looking back provides a sound basis to assess the extent of how historical trends are impacting us today,” he said.

“The reality is that for Australian households on median incomes, housing affordability has declined 13.6 per cent over a 20-year period and 12.4 per cent over the past 10 years.”

He said in comparison, rental affordability has declined just 1.3 per cent over a 20-year period, 0.9 per cent over a 10-year period and 0.5 per cent over the past five years.

“This will vary market by market, but it is critically important when considering measured policy responses in the current environment,” he said.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.