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The Real Estate Institute of Australia (REIA) has revealed that housing affordability has reached its lowest point since being monitored for the quarterly Housing Affordability Report (HAR).
According to the report, affordability fell for the third consecutive quarter with mortgage repayments requiring 50.1 per cent of the median family income over the December quarter 2024.
This represents a 1.4 percentage point increase in the average loan repayment on the previous quarter to the highest proportion since 1996.
However, the recent rate cut in February and potential reductions throughout 2025 bode better news for home owners.
All states and territories recorded deteriorating housing affordability, with the sharpest drop being recorded in Western Australia by 2.5 percentage points, while Victoria had the smallest decline at 0.6 percentage points.
According to REIA president Leanne Pilkington, rising property prices have been the primary driver of unaffordability due to the larger mortgage debt repayments.
“Despite this, national median weekly family income saw a modest increase of 0.9 per cent over the quarter and 3.7 per cent over the past 12 months, reaching $2,528. Interest rates remained stable, with the standard variable rate averaging 8.8 per cent and the three-year fixed rate decreasing slightly to 6.1 per cent,” she said.
“In contrast to homeownership affordability, rental affordability showed 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 remains the least affordable state for renters, while the Australian Capital Territory is the most affordable.”
The report also unveiled that the number of first home buyers increased by 5.5 per cent over the December quarter, reaching 31,036, although this was 1.3 per cent lower than the same time in the previous year.
Victoria had the highest number of first home buyers at 10,334, while the Northern Territory recorded the lowest number at just 258. The average loan size for first home buyers rose by 1.2 per cent to $542,644.
“Looking ahead, there are potential improvements in affordability in 2025. The Reserve Bank of Australia (RBA) cut interest rates by 0.25 per cent in February, with further reductions anticipated,” Pilkington said.
“Historically, each 0.25 per cent rate cut leads to a one percentage point decrease in the proportion of income required to service a mortgage. Additionally, rising vacancy rates could help slow rental price growth.”
