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The latest Housing Affordability Report released by ANZ and CoreLogic has shown affordability metrics deteriorating across most of the country in 2024 due to rising home values.
According to modelling from CoreLogic and the ANU POLIS for Social Policy Research, Australia’s latest gross median household income level sat around $101,000 per year as of September 2024, an increase from $98,500 the year prior.
This equates a 2.8 per cent rise over the past year, well below the 8.5 per cent rise recorded in the median dwelling value. As a result, the median dwelling value to income ratio has risen to 8.0, sitting above the 20-year average of 6.7 and equal to record highs seen in early 2022.
The report revealed that it now takes the median income household (assuming an annual saving rate of 15 per cent) 10.6 years to save for a 20 per cent deposit for the median value dwelling.
Additionally, assuming average mortgage rates for owner occupiers, a 20 per cent deposit and a 25-year loan term, it now takes 50.6 per cent of the median household income to service a new mortgage.
On a state-by-state basis, Sydney remained the least affordable capital to buy, however, Adelaide has seen the largest deterioration of housing affordability since the onset of the COVID-19 pandemic in March 2020, with the median dwelling value to income ratio rising from 5.9 to 8.9.
Adelaide stands as the second-least affordable market to purchase a property, requiring 56.2 per cent of income to service a new home loan, with almost 12 years needed to save for a 20 per cent deposit.
However, there has been some improvement in affordability, notably in Hobart, with the median dwelling value to income ratio falling from 9 to 7.3. Values in Hobart have declined 11.9 per cent from the record high in March 2022.
Furthermore, Melbourne with a median dwelling value just under $780,000 brings it to the sixth-least expensive capital city to live in. Meanwhile, Canberra is now the second-most affordable housing market behind Darwin, with the income needed to service a new mortgage sitting at 38.6 per cent.
Report author and CoreLogic’s head of research, Eliza Owen, said the value to income metrics “look extreme”, meaning buyers are “probably finding other means to get into the market compared to how they have in the past”.
“In reality, the median income household might buy something lower value than the median dwelling, and buyers in the market at the moment may be less leveraged and have relatively high income and wealth.
“This report highlights how squeezed even relatively high-income households are becoming at the national level.
“There are some pockets like Hobart and Melbourne where the market is becoming more affordable, but it’s unclear whether that can last. Part of the nature of the property cycle is that once values fall by a certain amount, sellers and developers cannot add to supply, and values find a floor,” she said.
Madeline Dunk, ANZ economist, said there’s been a softening in demand for housing in recent months with cost-of-living pressures, high interest rates and elevated home values deterring buyer competition.
“In some markets, this has contributed to value falls,” she said.
“Growth in units is now tracking broadly in line with houses, as less available affordable housing has shifted more demand towards units.
“Looking ahead to 2025, housing affordability may slightly improve from a mortgage payment perspective as the cash rate moves lower. ANZ Research expects the RBA to begin easing in February. We see just 75bp of rate cuts in total, taking the cash rate to 3.6 per cent by the end of 2025.”
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