Housing affordability drops in September quarter
Housing affordability in Australia has continued to worsen due to rising interest rates and soaring housing and rental prices, according to the Real Estate Institute of Australia’s latest Housing Affordability Report.
The report highlighted the increasing financial burden faced by Australians.
REIA president Leann Pilkington said that the cost of living has become a significant concern for Australians, with the cost of holding a mortgage on a home and the rising expenses in the previously affordable rental market at the forefront.
“It was these two things that characterised the September quarter. Nationally, the outlook for Australians serving a home loan continued to be challenging with the cash rate now at 4.35%,” Pilkington said. “Housing affordability has declined over the September quarter 2023, with the proportion of income required to meet the average loan repayment increasing to 45.5%, a marginal increase of 0.1 percentage points.”
The report found that housing affordability has declined in New South Wales, Queensland, and South Australia, while remaining stable in the Australian Capital Territory. However, there have been improvements in Victoria, Western Australia, Tasmania, and the Northern Territory. Notably, the Northern Territory experienced the largest improvement, with the proportion of income required decreasing by 1.1 percentage points. Conversely, South Australia saw the largest decline, with the proportion of income increasing by 0.7 percentage points.
Rental affordability
Rental affordability has also worsened, with the proportion of income required to meet median rent increasing by 0.5 percentage points to 23.6%.
Read next: REIA reports on state of Australia’s housing market
The decline in rental affordability was observed in New South Wales, Victoria, Queensland, and South Australia, while Western Australia, Tasmania, the Northern Territory, and the Australian Capital Territory saw improvements.
Fewer first-home buyers
Another concerning trend highlighted in the report is the decrease in the number of first-home buyers.
“The number of first-home buyers decreased to 26,928, a decrease of 5.4% during the quarter and a decrease of 4.0% compared to the September quarter 2022,” Pilkington said. “First-home buyers now make up 36.0% of the owner occupier dwelling commitments, a decrease of 0.5 percentage points over the quarter but an increase of 3.0 percentage points over the year.”
Additionally, the report revealed that the average loan size for first home buyers increased to $503,082, representing a 0.9% increase over the quarter and a 4.0% increase over the past twelve months. This increase was observed in all states and territories except Victoria, South Australia, and the Australian Capital Territory. Tasmania experienced the largest increase in average first home buyer loans (5%), while the Australian Capital Territory saw the largest decline (-4.9%).
Owner-occupier loans down
In terms of overall owner-occupied dwelling loans, the report indicates a decrease of 4.1% over the September quarter and a 12.1% decrease over the past year, with decreases observed in all states and territories. The average loan size increased to $592,140 over the September quarter, representing a 1.5% increase, REIA reported. However, there was a 0.6% decrease over the past 12 months.
The average loan size increased in all states and territories except Victoria and the Northern Territory, with the largest increase observed in South Australia (3.%).
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