REIA: housing affordability drops further

Housing affordability has continued to drop with the proportion of income needed to meet mortgage and rent payments rising in the June quarter.

In launching the Real Estate Institute of Australia’s (REIA) latest Housing Affordability Report, President Hayden Groves said lack of supply and surging interest rates had hit home ownership and tenancies hard.

“Nationally, the proportion of income required to meet average loan repayments increased to 38.4 per cent, an increase of 4.7 percentage points over the past year,” he said.

“This is due to a combination of rising interest rates and higher average loans with average loan repayments increasing over the past year by $621 per month.

“Housing affordability has declined in all states and territories over the past year with NSW having the largest decline (down 5.7 percentage points),” he said.

REIA President Hayden Groves.

Mr Groves said rental affordability also fell in the June quarter, with the proportion of income required to meet median rents increasing to 0.4 percentage points to 22.9 per cent.

This is a rise of 1.2 percentage points over the past 12 months.

“Over the quarter, rental affordability improved in Victoria but declined in all other states and territories with the least affordable state or territory in which to rent a property being Tasmania,” he said.

“The decline in housing affordability over the June quarter (down 2.7 percentage points) outpaced the decline in rental affordability (down 0.4 percentage points).”

Mr Groves said over the year, new loans had decreased 17.2 per cent to 93,956, with loans to first-home buyers dipping 32.6 per cent to 29,127. Loan values increased 11.6 per cent in the same timeframe, rising to an average of $612,079.

He said that, with rental and home sale listings remaining at historical low levels, he expected supply would be constrained for the foreseeable future.

“Supply chain challenges, rising building costs and labour shortages mean the pipeline of new homes for sale and rent will remain under long-term average levels,” Mr Groves said.

“REIA’s key focus is to look for ways to better utilise our existing housing stock, and at the time of writing, REIA had launched a new Axe the Tax campaign.

“The phase out of stamp duty could increase listings on the market by up to 50 per cent and it is in these big picture economic and productivity reforms we must invest in during the 47th Parliament in an effort to address housing supply shortages.

“While the outlook for housing affordability remains relatively gloomy, the next REIA Affordability Report, to be released in December 2022, should paint a clearer picture of the long-term impacts of inflation control measures.”

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Kylie Dulhunty

Kylie Dulhunty is the Deputy Editor at Elite Agent.