Key Points
- Only 14 per cent of homes are affordable for median-income households in Australia, a report shows.
- NSW, Tasmania, and Victoria are the least affordable states.
- Affordability rates have dropped sharply in the last three years.
A new report reveals that housing affordability in Australia has further deteriorated under the impact of high mortgage rates and rising home prices, reaching its worst level on record.
The PropTrack Housing Affordability Report, released on Saturday, shows that in 2023-2024, a median-income household earning $112,000 could afford only 14 per cent of homes sold—marking the lowest share since records began in 1995.
This figure has plummeted from 43 per cent just three years ago.
Low-income households have effectively been locked out of the housing market, with families earning $50,000 per year able to afford only 3 per cent of homes, the report shows.
Which states lead in unaffordability?
According to the report, NSW, Tasmania, and Victoria rank as the least affordable states in Australia.
NSW has the worst housing affordability of any state, with a slight decline over the past year.
A median-income household in NSW can afford only 10 per cent of homes sold statewide, with mortgage costs higher than any other state.
In Tasmania a median-income household could afford just 9 per cent of homes sold last year.
In Victoria, affordability has slightly decreased, with a median-income household able to afford only 12 per cent of homes sold in 2023-24.
South Australia experienced the largest decline in affordability over the past year, with a median-income household able to afford just 16 per cent of homes sold, down from nearly half (49 per cent) in the year of 2020-21.
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 the fact it was a more affordable market, meant WA experienced the fastest price growth in the past 12 months.
Renters could afford only 11 per cent of homes sold last year, whilst households with a mortgage could afford 34 per cent of homes sold over the same period.
What got us here?
Mortgage costs are at levels comparable to 2008, just slightly below the historical peaks reached in 1989-1990.
This means an average-income household needs to spend one-third of their income on mortgage repayments to afford a median-priced home.
Paul Ryan, PropTrack's senior economist, said that housing affordability is a critical issue affecting Australians in 2024.
"First-home buyers, or renters looking to buy, who often rely on significant borrowing to enter the housing market, are facing incredibly stretched affordability," he added.
When will it improve?
Following more than a dozen interest rate hikes, the Reserve Bank has kept the official cash rate at 4.35 per cent since November.
Ryan said that high interest rates have "reduced borrowing capacities by as much as 30 per cent for new borrowers and increased repayments for existing borrowers by up to 50 per cent in just two years".
Ryan said income growth has not kept pace with the rising home prices and interest rates, further exacerbating the affordability crisis.
However, Australian Treasurer Jim Chalmers said the economic outlook facing the US central bank differs from that of Australia, leaving the RBA's interest rate trajectory uncertain.
Ryan said housing affordability "is expected to ease when interest rates fall, which could be as soon as within the next six months.
"However, meaningful improvement — returning to a period where a typical household could afford half of homes — requires change on many fronts to build more homes across the country."
