Key Points
- Only 14 per cent of housing is affordable for median income households in Australia, a report has found.
- NSW, Tasmania and Victoria are the least affordable states.
- Affordability rates have fallen sharply over the past three years.
A new report reveals Australia’s housing affordability has further deteriorated under the impact of high mortgage rates and rising house prices, reaching its worst level on record.
The PropTrack housing affordability report, released Saturday, shows that in 2023-2024, a median-income household earning $112,000 could afford only 14% of homes sold, the lowest share since the beginning of the surveys in 1995.
This figure is down from 43 percent just three years ago.
Low-income households have been priced out of the housing market, with families earning $50,000 a year only able to afford 3 percent of housing, the report said.
Which states are leading in unaffordability?
According to the report, NSW, Tasmania and Victoria are the least affordable states in Australia.
NSW has the worst access to housing of any state, with a slight decline over the past year.
A median income household in NSW can only afford 10 per cent of homes sold statewide, with mortgage costs higher than any other state.
In Tasmania, a household on the median income could only afford 9 per cent of homes sold last year.
In Victoria, affordability has declined slightly, with a median income household able to afford only 12 per cent of homes sold in 2023-24.
South Australia has seen the biggest decline in affordability over the past year, with the median income household able to afford just 16 per cent of homes sold, down from almost half (49 per cent ) of the year 2020-2021.
Western Australia remains the most affordable state, where a median income household can afford 26 per cent of homes for sale.
PropTrack’s report suggests that being a more affordable market means WA has seen the fastest price growth over the past 12 months.
Renters could only afford 11 percent of homes sold last year, while households with a mortgage could afford 34 percent of homes sold over the same period.
What brought us here?
Mortgage costs are at levels comparable to those of 2008, just slightly below the historic highs reached in 1989-1990.
This means that a middle-income household must spend one-third of its income paying off its mortgage to afford a median-priced home.
PropTrack senior economist Paul Ryan said housing affordability is a critical issue that will affect Australians in 2024.
“First-time home buyers, or renters looking to buy, who often rely on large borrowings to access the property market, face incredibly limited affordability challenges,” he added.
When will it get better?
After more than a dozen interest rate hikes, the Reserve Bank has kept the official rate at 4.35 percent since November.
Ryan said high interest rates have “reduced borrowing capacity by up to 30 percent for new borrowers and increased repayments for existing borrowers by up to 50 percent in just two years.”
Ryan said income growth has not kept pace with rising house prices and interest rates, further worsening the affordability crisis.
On Thursday, the US Federal Reserve announced .
However, Australian Treasurer Jim Chalmers said the US central bank’s economic outlook differs from Australia’s, leaving the RBA’s interest rate trajectory uncertain.
Ryan said housing affordability “is expected to decline when interest rates fall, which could happen as early as the next six months.
“However, significant improvement – returning to a time when a typical household could afford half a home – requires changes on multiple fronts to build more housing across the country.”
