Housing affordability improves for second consecutive quarter, REIA report shows
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Photo by Kindel Media
In a welcome turn of events for Australian families, housing affordability has improved for the second consecutive quarter, according to the latest Housing Affordability Report released by the Real Estate Institute of Australia (REIA) for June 2025. The report indicates a shift in the housing market landscape after affordability hit record lows late last year.
REIA President Leanne Pilkington expressed optimism about the latest findings, noting, “It’s encouraging to see housing affordability improving for Australian families, particularly after the challenges we reported just six months ago.” Her comments reflect a growing sense of relief among potential homeowners who have been struggling in a market characterised by high prices and limited availability.
The report provides a detailed analysis of the housing market, revealing that the proportion of the median family income required to meet average loan repayments fell to 47.7% in the June quarter. This marks an improvement of 0.3 percentage points over the quarter and a 0.5 percentage point increase compared to the previous year. Such figures suggest that the measures implemented to address housing affordability are beginning to bear fruit.
Pilkington acknowledged the progress but cautioned against complacency. “While we’re not out of the woods, these results highlight that the measures taken so far are having a positive impact, especially for first home buyers who are re-entering the market in greater numbers,” she stated. Her comments underscore the ongoing need for vigilance and continued efforts to ensure that the housing market remains accessible to all Australians.
The report highlighted that affordability improved across nearly all states and territories, with Tasmania recording the most significant improvement at 1.8 percentage points. Queensland also saw a modest gain of 0.1 points. However, Western Australia experienced a decline in affordability by 0.4 percentage points, indicating regional disparities that require targeted interventions.
Renters, too, have felt the positive effects of the changing market dynamics. Rental affordability improved for the third successive quarter, with the proportion of income required to meet median rent nationally edging down to 24.4%. Improvements were noted in New South Wales, Victoria, Queensland, Tasmania, and the Australian Capital Territory. However, South Australia, Western Australia, and the Northern Territory saw a worsening in rental affordability.
The Reserve Bank of Australia’s decision to cut the official cash rate by 0.25 percentage points in May, lowering it to 3.85%, has supported these trends. This reduction has fed into borrowing costs, with the average standard variable rate easing to 8.3% and the average three-year fixed rate dipping to 5.9%.
First home buyers have been particularly active in the market, with 30,047 new loan commitments recorded nationally in the June quarter, up 15.8% from March. Every state and territory saw an increase in first home buyer activity, with Victoria leading the charge at 10,188 commitments. The Northern Territory recorded the smallest number at 258. The national average loan size for first home buyers climbed to $544,961, reflecting increased confidence and participation among this group.
Overall lending activity mirrored the more positive environment, with owner-occupiers making 83,416 new loan commitments during the quarter, up 14.5% from the previous three months. Loan sizes increased by 2.7% over the quarter to an average of $678,011, marking a 7.5% rise over the year.
Looking ahead, Pilkington noted the potential for further relief. “With another rate cut possible later this year and affordability now showing two consecutive quarters of improvement, the outlook for buyers is brighter than it has been in some time,” she said. Her remarks suggest a cautiously optimistic future for the housing market, buoyed by improving affordability, easing borrowing costs, and renewed activity from first home buyers.
As Australia moves into the second half of 2025, the REIA report underscores a sense of cautious optimism for the housing market. The combination of improving affordability and increased lending activity signals positive momentum, offering hope to those looking to enter the property market or secure more favourable terms on existing loans.
