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Housing affordability improves for the first time since 2021

Housing affordability for home buyers has finally turned a corner, showing improvement for the first time in three years.

However, renters continue to do things tough.

Real Estate Institute of Australia (REIA) President, Leanne Pilkington, said that while housing affordability had improved, Australians continued to suffer pain, with rental affordability declining while the number of first home buyers has also fallen.

Ms Pilkington said the good news for home buyers was that the proportion of income required to meet average loan repayments fell 1 percentage point to 46.7 per cent. 

The improvement can be attributed to stronger wage growth and a pause in interest rate hikes.

“This is the first improvement in housing affordability since a series of successive increases from the March quarter 2021 through to the December quarter 2023 saw this figure reach a high of 47.7 per cent,” Ms Pilkington said.

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

“Improvements ranged from 2.2 percentage points in NSW to 0.9 percentage points in Victoria and the ACT.”

Ms Pilkington said that while ownership affordability improved, rental affordability declined across the country.

“Nationally, the proportion of income required to meet median rents increased 0.5 percentage points over the quarter to 24.4 per cent,” she said.

Rental affordability declined in all states and territories, with drops ranging from 0.2 percentage points in Victoria to 0.7 percentage points in Tasmania.

Ms Pilkington said the number of first home buyers decreased to 25,824, a fall of 17.9 per cent over the quarter, but an increase of 8.3 per cent compared to the March quarter 2023. 

First home buyers now make up 36.7 per cent of the owner-occupier dwelling commitments, a decrease of 0.9 percentage points over the quarter but an increase of 1.5 percentage points over the year.

“The Reserve Bank of Australia maintained the official cash rate at 4.35 per cent throughout the March quarter,” she said.

“The quarterly average standard variable interest rate remained stable at 8.8 per cent. The quarterly average three-year fixed rate also remained stable at 6.8 per cent.”

She said over the March quarter, the number of first home buyers decreased in all states and territories. 

Western Australia had the smallest decrease (down 11.5 per cent) and the Northern Territory the largest decrease (down 35.9 per cent), although with only 150 loans made to first home buyers, the Northern Territory continued to be the nation’s smallest market. 

The average loan size to first home buyers increased to $518,510.

“This was an increase of 0.7 per cent over the quarter and an increase of 6.9 per cent over the past twelve months,” Ms Pilkington said.

“The average loan size to first home buyers increased in all states and territories except Victoria where there was a 0.4 per cent decrease,” she said.

“Western Australia had the largest increase in average first home buyer loans (4.1 per cent), and NSW had the smallest increase (0.1 per cent).

“The total number of owner occupied dwelling loans decreased to 70,374, a decrease of 15.8 per cent over the March quarter but an increase of 4.0 per cent over the past year. 

She said the total number of loans for owner occupiers decreased in all states and territories over the March quarter. 

“Decreases ranged from 7.4 per cent in Tasmania to 35.9 per cent in the Northern Territory,” she said.

“Over the March quarter, the average loan size decreased to $607,095, a decrease of 1.1 per cent over the March quarter but an increase of 3.5 per cent over the 12 months. 

“Over the quarter, the average loan size increased in Queensland (1.1 per cent), South Australia (0.9 per cent), Western Australia (3.7 per cent) and the Northern Territory (1.3 per cent). 

Ms Pilkington said decreases in average loan size ranged from 0.1 per cent in Victoria to 2.9 per cent in New South Wales. 

“Over the past 12 months, the average loan size increased in all states and territories except Victoria,” she said.

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Rowan Crosby

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