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Housing affordability in Australia has hit a record low, with mortgage repayments exceeding 50 per cent of the median family income, putting further pressure on home ownership.
According to the latest Real Estate Institute of Australia (REIA) Housing Affordability Report, affordability declined for a third consecutive quarter in December.
The report showed that mortgage repayments now consume 50.1 per cent of median household income, the highest level since REIA records began in 1996.
According to the REIA report, the national median weekly family income rose by 0.9 per cent for the quarter and 3.7 per cent over the year to $2,528.
Interest rates remain steady, with the standard variable rate averaging 8.8 per cent, while the three-year fixed rate dipped slightly to 6.1 per cent.
REIA president, Leanne Pilkington, acknowledged the challenges outlined in the report.
“Unfortunately, the first report of the year, covering the last quarter of 2024, has not brought good news for housing affordability,” she said.
“This is the third consecutive quarter in which housing affordability has declined to a new all-time low.”
The decline was seen across all states and territories, with Western Australia recording the steepest drop, down 2.5 percentage points, while Victoria experienced the smallest decline at 0.6 percentage points.
Rising property prices remain the main driver, pushing buyers to take on larger mortgages to secure homes.
Despite worsening home ownership affordability, rental affordability showed slight improvement.
The proportion of income needed to cover median rent fell to 24.7 per cent, a 0.2-percentage-point decrease from the previous quarter.
NSW remains the least affordable state for renters, while the ACT is the most affordable.
REIA said it was encouraging that first home buyers activity picked up, with numbers rising 5.5 per cent over the quarter to 31,036, though this remains 1.3 per cent lower than a year ago.
Victoria had the highest number of first home buyers with 10,334, while the Northern Territory recorded the lowest with 258.
The average loan size for first home buyers rose by 1.2 per cent to $542,644.
Despite worsening in the last quarter of December, the REIA report signals potential improvements in affordability throughout 2025.
Following a 0.2 per cent interest rate cut by the Reserve Bank of Australia in February, further reductions are expected which could ease mortgage pressure.
Historically, every 0.25 per cent rate cut reduces mortgage repayment burdens by approximately 1 percentage point.
Additionally, REIA said rising vacancy rates may help slow rent price growth, offering some relief for renters.
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