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PropTrack has released its annual Housing Affordability Report, revealing that housing affordability in Australia has reached its worst level on record.
PropTrack’s Affordability Index evaluates the proportion of homes that are affordable to purchase for households across various income levels, locations, and tenure types, providing a summary measure of affordability that can be compared across different regions and over time.
The report highlighted a significant decline in housing affordability over the past year, driven by soaring mortgage rates and rising home prices.
A median-income household earning around $112,000 can now afford just 14 per cent of homes sold in the 2023–24 financial year, the smallest share recorded since 1995. This represents a steep decline from 43 per cent just three years ago.
NSW, Tasmania, and Victoria are noted as the states with the worst affordability. In NSW, a median-income household can afford only 10 per cent of homes sold, while mortgage costs in the state are the highest in the country.
South Australia has experienced the largest drop in affordability, with a median-income household able to afford just 16 per cent of homes sold in FY23–24, down from nearly half (49 per cent) in 2020–21.
The report also revealed that a median-income renting household could afford only 11 per cent of homes sold over the past year, compared to 34 per cent for a median household with a mortgage.
Current mortgage costs are comparable to those seen in 2008 and are just below the historical peaks reached in 1989–90. An average-income household would need to allocate a third of their income to mortgage repayments to purchase a median-priced home.
Paul Ryan, senior economist at PropTrack, said: “Housing affordability is a critical issue affecting Australians in 2024.
“Above average increases in home prices, along with interest rates at the highest level in the past decade, have resulted in the worst housing affordability conditions since our records began.”
Households across the income distribution could afford the smallest share of homes on record over the past year, with a noticeable decline from just a year ago.
“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 said.
Ryan further said that over the past year, mortgage rates have reached their highest level since 2011, drastically impacting housing affordability.
This has 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.
National home prices have risen for the 20th consecutive month, increasing by 6.6 per cent over FY23–24, which translates to around a $50,000 rise in the national median price.
Ryan said: “In this time, income growth has been insufficient to offset rapidly rising home prices and mortgage rates, meaning the typical Australian household can now afford only 14 per cent of all homes sold across the country.
“Housing affordability is expected to ease when interest rates fall, which could be as soon as within the next six months. But 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.”
The report also said that low-income households have effectively been locked out of the market, with a household earning $50,000 per year able to afford just 3 per cent of homes.
An average-income household would need to save 20 per cent of their income for over five and a half years to accumulate a 20 per cent deposit on a median-priced home. Despite higher incomes, NSW remains the state with the highest deposit hurdles, taking around 6.5 years to save a deposit.
In contrast, Western Australia is ranked as the most affordable state, with a median-income household able to afford 26 per cent of homes for sale, which has contributed to rapid home price growth in the region over the past year.
Additionally, housing accessibility, measured by the time it takes to save for a mortgage for first home buyers in Queensland, is currently at its longest ever at 5.4 years.
[RELATED: Housing affordability in Australia declines to record low]
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