Interest rates offer breathing room for buyers and renters

Australia’s housing market saw improved affordability in the March quarter 2025, with the proportion of median family income needed to meet average loan repayments falling to 48.0 per cent.

The Real Estate Institute of Australia Housing Affordability Report shows affordability improved by 2.0 percentage points over the quarter, marking the first signs of relief in over a year.

REIA President Leanne Pilkington said the result marks “the greatest quarterly improvement in housing affordability since the March quarter 2016.”

The improvement stems from a combination of rising incomes and easing repayment levels.

National median weekly family income increased by 1.1 per cent over the quarter and 4.0 per cent year-on-year, reaching $2,561.

Average monthly loan repayments dropped by 2.9 per cent to $5,323 due to reduced interest rates and smaller loan amounts.

“All states and territories saw housing affordability gains, with the exception of the Northern Territory, where affordability slipped by 0.5 percentage points,” Ms Pilkington said.

“Tasmania recorded the smallest improvement (0.1 percentage points), while New South Wales and the Australian Capital Territory led the way with a 3.0 percentage point gain.”

Rental affordability also improved for the second consecutive quarter.

The national proportion of income required to pay median rent decreased by 0.2 percentage points to 24.5 per cent.

New South Wales and Western Australia recorded the greatest improvements in rental affordability, while conditions deteriorated in Queensland, Tasmania and the Northern Territory.

Ms Pilkington noted challenges remain, with New South Wales continuing as the least affordable state or territory for rentals.

First home buyers remained active in the market despite seasonal expectations.

There were 26,091 new loan commitments during the March quarter, 15.9 per cent lower than the previous quarter but 1.0 per cent higher than a year ago.

These buyers made up 35.7 per cent of all owner-occupier dwelling loan commitments, holding steady over the quarter but down 1.1 percentage points annually.

Ms Pilkington cautioned it was too early to declare a full-scale recovery in affordability.

“Sustained interest rate settings and wage growth will be key to maintaining this positive momentum,” she said.

With economic conditions easing and cost pressures beginning to stabilise, both aspiring homeowners and renters may find 2025 a more navigable path forward.