Australians face the worst housing affordability in 28 years, finds Real Estate Institute of Australia

A new report from reveals Australian families are being forced to dedicate nearly half their incomes to the mortgage | INTERACTIVE

The Real Estate Institute of Australia’s quarterly Housing Affordability Report (HAR) has recorded the worst result since the measure began in 1996. Picture: Newswire /Gaye Gerard

Property owners are facing the worst affordability in almost three decades, with Australian families being forced to dedicate nearly half their incomes to the mortgage to hold on to their homes.

The Real Estate Institute of Australia’s quarterly Housing Affordability Report (HAR) has recorded the worst result since the measure began in 1996.

Household budgets are now being stretched further in Queensland and South Australia than in Melbourne as wages fail to keep up with the pace of rising home costs.

At a national level, the average mortgage repayment now amounts to 48.1 per cent of the median family income, an increase of 1.3 percentage points over June quarter.

President of the Real Estate Institute of Australia, Leanne Pilkington said the report highlights how rising interest rates, depleted savings, and the limited availability of rental properties — exacerbated by platforms like Airbnb — are making it increasingly difficult for Australians to secure housing.

“With fewer rentals on the market and costs soaring, many are finding themselves priced out, while prospective buyers are struggling under the weight of higher borrowing costs,” she said.

New South Wales homeowners are dedicating almost three-fifths (57.9 per cent) of their incomes to their loans. Wages have been unable to keep up with property price gains in Queensland and South Australia, where families are now spending 46.8 per cent and 46 per cent, respectively, to keep their homes.

Each state has now overtaken Victoria, where affordability sits at 45.8 per cent, due to soft conditions in the Melbourne and regional markets.

Affordability slipped by more than a percentage point in 1 per cent in Tasmania (43.1 per cent) and Western Australia (39.5 per cent). But each of Australia’s territories recorded improved family budgets over the June quarter, with around a third of income needed to service a mortgage.

The Reserve Bank has maintained the cash rate at 4.35 per cent since November, which has largely slowed the momentum of property price growth. PropTrack senior economist Anne Flaherty said many households are feeling the pinch.

“Most households in Australia have taken a cut to real earnings and at the same time the cost of renting has increased, the cost of buying a home has increased. Then, of course, interest rates add an additional layer to that, making it more expensive to borrow,” Ms Flaherty said.

The HAR found the average standard variable interest rate remained stable at 8.8 per cent, as did the three-year fixed rate at 6.8 per cent.

RBA governor Michele Bullock warned this week a cut to rates will not happen until inflation returns to the target range of 2 to 3 per cent. She warned that a small number of variable rate mortgage holders – about five per cent – are cash flow negative and may have to sell their homes. Federal opposition housing spokesman Michael Sukkar the figures prove the housing crisis is out of control.

“The reality is, for the past 27 months of Labor we’ve seen no new money, no new ideas, no new homes, nothing for first home buyers, no new initiatives for renters – and countless broken promises,” Mr Sukkar said.

“The gap between Australians and the Australian dream of homeownership is getting wider under Labor.”

Despite the challenging conditions and the average national loan size inflating to $629,249, first-home buyers have maintained about a third of the overall purchasing market.

The proportion of income required to meet median rents increased 0.2 percentage points over the quarter to 24.6 per cent.