Proptrack report reveals housing affordability worst in three decades

Australians are struggling harder than ever before to enter into the housing market, with a new report revealing the grim reality of paying a mortgage.

Housing affordability is at its worst level in three decades, with the average Australian household able to afford just 13 per cent of the market.

A new Proptrack report paints a grim picture for the Great Australian Dream, revealing the sharp rise in mortgage rates and skyrocketing home prices are pricing thousands of people out of buying a home.

The report found households earning the median income of about $105,000 can afford 13 per cent of all homes sold across the country in the last year – the lowest level since records began in 1995; and low income households earning $64,000 a year can afford just three per cent of homes.

Even those who can afford to buy a home are struggling after the contract is signed, because servicing a mortgage is “close to as hard as it has ever been” – just below the peak in 1989.

Meanwhile, average earning households need to spend a third of their income to meet their repayments on a median-priced home.

Housing affordability is at its worst level in three decades, a new report reveals. Picture: NCA Newswire/ Gaye Gerard

The situation is worse in NSW, where a typical-income household can afford just seven per cent of the homes sold in the state. Victoria and Tasmania round out the hardest places to afford a home, while Queensland and WA remain the most affordable.

Home prices rose for the eight consecutive month in August, meaning there are now “far fewer homes” for which mortgage repayments are affordable than in years prior.

Proptrack senior economist and co-author Angus Moore said the situation was “especially challenging” for first-home buyers and lower-income households, because the average household will need to save 20 per cent of their income for 5.5 years to save a 20 per cent deposit on a median-priced home.

Young people – those aged 25-34, can afford fewer than 30 per cent of homes.

The situation is worse for low-income households and first-home buyers. Picture: NCA NewsWire / Aaron Francis

“Mortgage interest rates have increased extremely rapidly from the record lows in 2020 and 2021, following RBA rate hikes that began in May 2022. This has caused the sharpest increase in mortgage rates since the mid-1980s and has reduced borrowing capacities by as much as 30 per cent for new borrowers,” Mr Moore said.

“At the same time, existing borrowers, which make up around a third of Australian households, have faced sharp increases in mortgage repayments. A typical recent borrower now faces repayments as much as 50 per cent higher than in early 2022.

“Household incomes have risen since the pandemic and improved labour market conditions have drawn more people into employment and boosted wages growth. However, this has been insufficient to offset higher home prices and, critically, the surge in mortgage rates.”