Affordability in Decline

By Hayden Groves

The Real Estate Institute of Australia’s latest Housing Affordability Report was released this week revealing housing affordability declined in the June quarter across Australia. As expected, NSW and Victoria remain the least affordable places to buy property with an eye-watering 47.7 percent of a family’s income devoted to meeting the average loan repayment in NSW. In Victoria, 39.7 percent of their hard-earned goes to meeting mortgage commitments. The national average is 38.4 percent.

Happily, Western Australia remains astonishingly affordable with 28.2 percent of our median weekly income of $2,325 covering the average loan of $473,217. In contrast, mortgage holders in NSW hold average loans of $777,568.

As expected, housing affordability has deteriorated over time declining 9.8 percent over twenty years with more than half of that decline (4.9 percent) occurring in the past five years. Tasmania’s decline in affordability tops the chart with a 15.5 percent fall in affordability over twenty years. Once more, WA’s affordability performance remains appealing to home buyers and investors with a meagre 2.8 percent deterioration in affordability in twenty years. Right now, WA is three percent more affordable than it was ten years ago.

WA is three percent more affordable than it was ten years ago.

Rental affordability has had plentiful media coverage of late due to its recent deterioration. With the average tenant paying 22.9 percent of their income on rent, leasing remains significantly more affordable than property ownership. Tasmania remains the least affordable rental state at 29.6 percent with WA sharing the honours with Victoria as the most affordable with tenants paying 19.7 percent of income for rent.

Whilst property ownership affordability has rapidly declined over the past five years, national rental affordability has proven more stable, dropping a mere 0.3 percent in twenty years. Rental affordability has, in fact, improved over the past five years across the nation, up 0.6 percent.

Despite the relative stability of rental affordability over the past twenty years, the data reveals a step rise in median rents since 2020 moving from $425 per week to $508 per week in 24 months. The steepest increase has been felt in Queensland where rents have moved from $378 per week to $475 in two years. A new investor-killing land tax regime in Queensland won’t be much help to tenants with investors selling down and an estimated 1000 new residents heading to the sunshine state each week.

Back home, median house rents have moved from $350 per week to $450 per week over two years, encouraging first home buyers into home-ownership. 36.7 percent of all WA buyers in the June quarter were first-time buyers, the highest proportion in Australia. Investors should take note too as WA property continues to deliver the best rental yields in the nation at 3.9 percent. Despite these appealing yield numbers, the proportion of lending to households for dwelling investment in WA remains behind all east-coast states at 24.6 percent.