Mortgage holders are facing increased financial strain but renters have been given a slight reprieve, according to the Real Estate Institute of Australia’s latest data.
According to the latest Housing Affordability Report, housing affordability declined nationwide at the end of 2022, with the proportion of income required to meet the average loan repayment increasing to 44.7 per cent, marking an increase of 2.4 percentage points since the last survey.
“New South Wales had the highest decline with the proportion of income increasing 3.1 percentage points to a huge 54.8 per cent and the Northern Territory had the lowest decline with the proportion of income increasing 1.1 percentage points to 32.2 per cent,” Mr Groves.
Rental affordability, however, improved with the proportion of income required to meet median rent decreasing 0.1 percentage points to 22.9 per cent.
This was down to an increase in family income, as well as a lack of rent rises in Australia’s major cities during the reporting period.
“In particular, the median rent remained stable in Sydney and only went up $5 in Melbourne,” Mr Groves said.
“These markets account for 60 per cent of the national rental cohort.”
Mr Groves noted that the next Housing Affordability Report, which would encompass the first quarter of 2023, would fully reflect the impact of rate hikes and population increases on renters.
Multiple data providers have noted a decline in rental affordability during the early months of 2023, with demand from returning overseas students in particular putting a strain on inner-city Sydney and Melbourne markets.
Westpac recently predicted that rents would rise a further 11.5 per cent during 2023.
Fewer loans being taken out
Mr Groves said fewer home loans were taken out in the final quarter of 2022, with first-time buyers, in particular, affected.
“Times remain tough for first home buyers with the number of first home buyers dropping to 25,753, a decrease of 2.2 per cent during the quarter and a fall of 31.4 per cent compared to the December quarter 2021,” he said.
The total number of loans for owner-occupied dwellings decreased in all states and territories over the December quarter, with decreases ranging from 1.6 per cent in Western Australia to 9.4 per cent in the Australian Capital Territory and the Northern Territory.