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Housing affordability drops to a new low

Australians are struggling to afford housing like never before as rising interest rates and soaring housing and rental prices continue to bite.

According to the Real Estate Institute of Australia (REIA) Housing Affordability Report, housing affordability hit a new low in September.

REIA President, Leanne Pilkington, said the results come at a time when cost-of-living has never been more on the minds of Australians.

“Central to that is the cost of holding a mortgage on your home, and the rising costs of a previously very affordable rental market,” Ms Pilkington said.

“It was these two things that characterised the September quarter.”

Ms Pilkington said housing affordability had declined over the September quarter 2023, with the proportion of income required to meet the average loan repayment increasing to 45.5 per cent, a marginal increase of 0.1 percentage points.

“Housing affordability declined in NSW Queensland and South Australia, remained stable in the ACT, but improved in Victoria, Western Australia, Tasmania and the Northern Territory,” she said.

She said the Northern Territory had the largest improvement, with the proportion of income decreasing 1.1 percentage points while South Australia had the largest decline, with the proportion of income increasing 0.7 percentage points.

Rental affordability declined in NSW, Victoria, Queensland and South Australia, but improved in Western Australia, Tasmania, the Northern Territory and the Australian Capital Territory.

“Rental affordability declined, with the proportion of income required to meet median rent increasing by 0.5 percentage points to 23.6 per cent,” Ms Pilkington said.

Higher interest rates are also making life challenging for first-home buyers, with the number of first-home buyers decreasing to 26,928 – down 5.4 per cent during the quarter and a decrease of 4 per cent compared to the September quarter 2022

First-home buyers now make up 36 per cent of the owner-occupier dwelling commitments, a decrease of 0.5 percentage points over the quarter but an increase of 3 percentage points over the year.

Ms Pilkington said over the September quarter, the number of first-home buyers decreased in all states and territories. 

“Victoria had the smallest decrease (down 0.4 per cent) and the ACT had the largest (17.2 per cent),” she said.

According to the report, the Reserve Bank of Australia (RBA) maintained the official cash rate at 4.1 per cent over the September quarter, while the quarterly average variable standard interest rate also remained stable at 8.5 per cent. 

The quarterly average three-year fixed rate increased 0.2 percentage points to 6.6 per cent by the end of the quarter.

“The average loan size to first-home buyers increased to $503,082,” Ms Pilkington said.

“This was an increase of 0.9 per cent over the quarter and an increase of 4 per cent over the past 12 months.”

The average loan size to first-home buyers increased in all states and territories except Victoria, South Australia and the Australian Capital Territory where there was a decline. 

Tasmania had the largest increase in average first home buyer loans (5 per cent) and the ACT had the largest decline (down 4.9 per cent).”

Ms Pilkington said the total number of owner-occupied dwelling loans decreased to 74,855, a decrease of 4.1 per cent over the September quarter and a decrease of 12.1 per cent over the past year. 

The total number of loans for owner-occupied dwellings decreased in all states and territories over the September quarter. 

She said decreases ranged from 0.8 per cent in Victoria to 15.4 per cent in the ACT.

“Over the September quarter, the average loan size increased to $592,140, an increase of 1.5 per cent over the September quarter but a decrease of 0.6 per cent over the past 12 months,” she said.

Over the quarter, the average loan size increased in all states and territories except Victoria and the Northern Territory.

Ms Pilkington said increases ranged from 0.7 per cent in Western Australia to 3 per cent in South Australia. 

“Over the past 12 months, the average loan size increased in Queensland, South Australia, Western Australia and the Australian Capital Territory but decreased in NSW, Victoria, Tasmania and the Northern Territory,” she said.

“Increases ranged from 0.2 per cent in the ACT to 6 per cent in South Australia.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.