<strong>Housing Less Affordable</strong>

By Hayden Groves

The Real Estate Institute of Australia’s (REIA’s) latest Housing Affordability Report was released last week revealing housing affordability declined by the end of 2022 across Australia. As expected, NSW and Victoria remain the least affordable places to buy property (with Sydney the second most expensive city in the world to buy behind Hong Kong) with an eye-watering 54.8 percent of a family’s income devoted to meeting the average loan repayment in NSW. In Victoria, 45.8 percent of their hard-earned goes to meeting mortgage commitments. The national average is now 44.7 percent, well above mortgage-stress territory. We are fast approaching record levels of housing un-affordability.

Happily, Western Australia remains astonishingly affordable with 33.8 percent of our median weekly family income of $2,423 covering the average loan of $479,772. In contrast, mortgage holders in NSW hold average loans of $749,521 with a median family income of $2,336.  

As expected, housing affordability has deteriorated over time declining 13.9 percent over twenty years with much of that decline (10.9 percent) occurring in the past five years. Tasmania’s decline in affordability tops the chart with a 15.3 percent fall in affordability over twenty years. Once more, WA’s affordability performance remains appealing to home buyers and investors with a modest 7.5 percent deterioration in affordability in twenty years.

Rental affordability has had plentiful media coverage of late due to its recent deterioration. With the average tenant across Australia paying 22.9 percent of their income on rent, leasing remains significantly more affordable than property ownership. Rental affordability appears to have stabilised, improving in the December quarter by 0.1 percent thanks to an increase in average wages.

Whilst property ownership affordability has rapidly declined over the past five years, national rental affordability has proven more stable, dropping a mere 0.8 percent in twenty years. Rental affordability has, in fact, improved over the past five years across the nation, up 0.7 percent.

Whilst rental affordability is stable, median rents continue to climb with lack of housing supply the main contributor to the increases. A potent combination of low investor activity, rising interest rates, stamp duties, land taxes, insufficient social housing, tenant-friendly tenancy laws, increasing population, construction industry blockages and short-stay accommodation continue to conspire against maintaining a reasonable supply of rental homes.

In Perth, median house rents have moved from $350 per week to $470 per week over two years, encouraging first home buyers into home-ownership. 36.1 percent of all WA buyers in the December 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.