Australian Housing Affordability Plummets to Record Low: ‘A National Crisis That Demands Action’
- Housing affordability rates have hit an all-time low, with households earning $125,000 able to afford just 12% of homes sold nationally.
- Mortgage repayments as a share of household income are at their highest rate since 1989, with 35.5% of average household income going towards repayments.
- Economists warn that affordability will remain a significant challenge until there is a meaningful increase in housing supply, with a “clear structural supply problem” at the heart of the issue.
- Experts are calling for urgent action, including limits on rent increases and a dramatic boost to social housing stock, to address the crisis.
The Australian housing market has reached a crisis point, with affordability rates plummeting to a record low. Despite recent declines in property prices, households earning a median income of $125,000 can only afford 12% of homes sold nationally.
This shocking statistic is just the tip of the iceberg, with mortgage repayments as a share of household income at their highest rate since 1989.
The numbers are stark.
According to data from realestate.com.au, a household earning a median income of $125,000 can only afford 12% of all homes (houses and units combined) sold nationally in the last financial year.
This is a decline from the already dire situation in the previous year, when households could afford 14% of homes.
The situation is even more dire in some states, with South Australia becoming the least affordable state, where just 7% of properties sold are affordable for median households.
So, what’s driving this crisis? Economists point to a combination of factors, including higher property prices, slower income growth, and higher mortgage rates.
The recent interest rate hikes by the Reserve Bank of Australia (RBA) have further constrained household borrowing capacity, making it even harder for people to get a foot on the property ladder.
As realestate.com.au’s senior economist, Angus Moore, notes, “The three RBA interest rate hikes made in February, March and May increased mortgage rates and further constrained household borrowing capacity amid an already difficult cost-of-living environment.”
But the problem runs deeper than just interest rates. At the heart of the issue is a “clear structural supply problem” in the housing market.
As economist Luc Redman notes, “Home prices have remained elevated across the sales distribution — despite a softening in the back half of the financial year — combined with higher interest rates reducing households’ borrowing capacity.” This means that even if interest rates were to come down, the underlying issue of supply and demand would still remain.
Analysis: What This Means for Australia
The housing affordability crisis has serious implications for Australia’s economy and society. With mortgage repayments taking up such a large share of household income, it’s no wonder that many families are struggling to make ends meet.
The situation is particularly dire for first-home buyers, who are finding it increasingly difficult to get a foot on the property ladder.
As Maiy Azize, national spokesperson for Everybody’s Home, notes, “The government’s tax reforms are a great step, but they will take time to work their way through the housing market.
These numbers show we need action in the meantime.”
Experts are calling for urgent action to address the crisis. This includes limits on rent increases to give renters some breathing room, as well as a dramatic boost to social housing stock.
As Azize notes, “We can’t rely on the private market to deliver the affordable homes. These numbers make that clear.
That’s why the federal government needs to dramatically boost social housing. Government can build affordable homes at the scale needed, in the places people need them.
It also takes pressure off the rental market because fewer people will be competing for affordable rentals.”
Others are calling for a mandatory Mortgages Charter that would extend hardship provisions to all borrowers.
As Nadia Harrison, chief executive of Mortgage Stress Victoria, notes, “At the moment, the rights and protections you have as a home owner in hardship vary depending on the lender you’ve borrowed from, and the industry code that they subscribe to.
A mandatory Mortgages Charter which lifts and harmonises hardship protections across the board would go a long way to making mortgages fairer.”
The situation is dire, but it’s not too late to act. As the experts warn, the housing affordability crisis demands urgent attention and action.
Will the government listen, or will the crisis continue to worsen?