Housing affordability drops to record low, but experts predict improvement in 2025
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Photo by Andreas Leindecker
Housing affordability in Australia has reached its lowest point since records began, with mortgage repayments now consuming more than half of the median family income, according to a new report.
The Housing Affordability Report from the Real Estate Institute of Australia (REIA) shows affordability declined for the third consecutive quarter by the end of 2024.
Mortgage repayments now account for 50.1 per cent of the median family income, an increase of 1.4 percentage points over the quarter.
REIA President Leanne Pilkington confirmed the grim findings in the report.
“Unfortunately, the first report of the year, covering the last quarter of 2024, has not brought good news for housing affordability,” Ms Pilkington said.
“This is the third consecutive quarter in which housing affordability has declined to a new all-time low.”
All states and territories experienced declining affordability, with Western Australia recording the steepest drop of 2.5 percentage points.
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Victoria fared slightly better with the smallest decline of 0.6 percentage points.
Rising property prices were identified as the primary driver behind reduced affordability, forcing buyers to take on larger mortgages.
Despite the affordability crisis, the national median weekly family income increased modestly by 0.9 per cent over the quarter and 3.7 per cent over the past 12 months, reaching $2,528.
Interest rates remained relatively stable during the period, with the standard variable rate averaging 8.8 per cent and the three-year fixed rate decreasing slightly to 6.1 per cent.
The rental market provided a small bright spot, with rental affordability showing slight improvement.
The proportion of income required to meet median rent decreased to 24.7 per cent, a drop of 0.2 percentage points over the quarter.
New South Wales continues to be the least affordable state for renters, while the Australian Capital Territory offers the most affordable rental conditions.
First-home buyer numbers increased by 5.5 per cent over the quarter to 31,036, though this figure remains 1.3 per cent lower than the previous year.
Victoria led the way with the highest number of first-home buyers at 10,334, while the Northern Territory recorded just 258.
The average loan size for first-home buyers increased by 1.2 per cent to $542,644.
The report suggests potential improvements in affordability could emerge in 2025, following the Reserve Bank of Australia’s interest rate cut of 0.25 per cent in February.
Historically, each 0.25 per cent rate cut leads to approximately a one percentage point decrease in the proportion of income required to service a mortgage.
Rising vacancy rates could also help moderate rental price growth, potentially easing pressure on the housing market.