Housing affordability improves for the first time since 2021, but it’s a tale of two cities

The Real Estate Institute of Australia (REIA) has reported that housing affordability for home buyers improved in the March quarter of 2024, marking the first improvement in three years.
However, REIA President Leanne Pilkington said Australians continue to suffer pain with declining rental affordability and a fall in the number of first home buyers.

According to Ms Pilkington, the proportion of income required to meet average loan repayments fell 1.0 percentage points to 46.7%, attributable to stronger wage growth and a pause on 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%,” she said.

Housing affordability improved in New South Wales, Victoria, Tasmania and the Australian Capital Territory, remained stable in South Australia, and declined in Queensland, Western Australia and the Northern Territory.
Improvements ranged from 2.2 percentage points in New South Wales to 0.9 percentage points in Victoria and the Australian Capital Territory.

Despite the improvement in ownership affordability, Ms Pilkington noted that 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%, with declines ranging from 0.2 percentage points in Victoria to 0.7 percentage points in Tasmania.

The number of first home buyers decreased to 25,824, a 17.9% decrease over the quarter but an 8.3% increase compared to the March quarter 2023.
First home buyers now make up 36.7% of 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% throughout the March quarter, with the quarterly average standard variable interest rate and the 3-year fixed rate remaining stable at 8.8% and 6.8%, respectively.

Western Australia had the smallest decrease in first home buyers at 11.5%, while the Northern Territory had the largest at 35.9%, although it remains the nation’s smallest market with only 150 loans made to first home buyers.
The average loan size to first home buyers increased to $518,510, a 0.7% increase over the quarter and a 6.9% increase over the past twelve months.

The total number of owner occupied dwelling loans decreased to 70,374, a 15.8% decrease over the March quarter but a 4.0% increase over the past year.
Decreases ranged from 7.4% in Tasmania to 35.9% in the Northern Territory.

The average loan size decreased to $607,095, a 1.1% decrease over the March quarter but a 3.5% increase over the 12 months.
Over the quarter, the average loan size increased in Queensland, South Australia, Western Australia and the Northern Territory, while decreases ranged from 0.1% in Victoria to 2.9% in New South Wales.