INDUSTRY NEWSNationalNEWS

Housing affordability stretching homeowners to the limit

It’s tougher than ever to afford a home with new data showing the proportion of income needed to pay off a mortgage has risen to 37 per cent.

The Real Estate Institute of Australia‘s latest Housing Affordability Report has found the proportion of income to service a loan increased 3.9 per cent in the past year, pushing many borrowers to their limit.

The average loan size has increased 3.5 per cent in the past quarter and 17.7 per cent in the past year, to $590,482, which is the largest annual increase since 2002.

The report found housing affordability declined in most states and territories, ranging from a decrease of 0.1 percentage points in Western Australia to 5.9 percentage points in NSW.

For renters, the proportion of income required to meet median rent increased to 23 per cent, a 0.1 per cent change over the quarter and a 0.3 per cent change over the year. 

Rental affordability improved in Sydney and the Northern Territory, where the proportion of income to required to meet median rent decreased to 26.1 per cent and 25.9 per cent respectively.

Western Australia had the most affordable rent, with the proportion of income required to meet median rent at 19.7 per cent. While Tasmania had the least affordable rent at 30 per cent.

REIA President, Hayden Groves said affordability for home buyers and renters continued to deteriorate and would worsen if interest rates rose.

“We are urging governments to get on the front foot with this issue by prioritizing housing supply shortages, which is the most effective way of getting affordability under control,” Mr Groves said.

Rising house prices continued to put first-home buyers under pressure with that portion of the market decreasing 0.4 per cent to make up just 34.1 per cent of owner-occupier dwelling commitments, which is a decrease of 7.8 per cent over the year.

Mr Groves said despite the number of first-home buyers falling, loan size is increasing.

“The average loan size to first-home buyers increased to $470,548,” he said.

“This was an increase of 2.5 per cent over the quarter and an increase of 12.9 per cent over the past twelve months. 

“The average loan size to first-home buyers increased in all states and territories except Tasmania where it decreased 0.4 percentage points. Increases ranged from 0.8 per cent in Western Australia to 2.9 per cent in both NSW and Victoria.”

Owner-occupier loans increased 2.2 per cent over the December quarter to be marginally higher by 0.3 per cent over the past 12 months according to Mr Groves.

“The total number of loans for owner occupied dwellings increased in Victoria (4.1 per cent), Queensland (1.2 per cent), South Australia (5.1 per cent), Western Australia (2.7 per cent) and Tasmania (5.0 per cent) but decreased in New South Wales (0.1 per cent), Northern Territory (5.5 per cent) and the Australia Capital Territory (3.7 per cent),” he said.

“The average loan size increased in all states and territories with the Northern Territory having the highest increase of 7.9 per cent.

“The average loan size increased in all states and territories over the past 12 months, with Victoria recording the highest annual increase at 22.6 per cent.”

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Rowan Crosby

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