- Middle-income households are limited to a small portion of the housing market
- Housing affordability has now hit ‘worst level on record’, experts reveal
Housing affordability in Australia has deteriorated to its “worst level on record”, driven by high mortgage rates and rising house prices.
The grim finding from PropTrack’s latest Housing Affordability Report means that a typical median-income household (earning around $112,000) can afford just 14 percent of homes sold nationwide.
That figure represents the smallest share of housing since records began in 1995, as the share fell from 43 percent in just three years.
New South Wales, Tasmania and Victoria were named as the states with the worst housing affordability rates.
The report found that a middle-income household could afford just 10 per cent of homes sold in New South Wales, which also had higher mortgage costs than anywhere else in Australia.
PropTrack’s report found that South Australia recorded the biggest decline in affordability over the past year, with a median-income household there only able to afford 16 per cent of homes sold during the last financial year.
The figure creates a bleak picture for housing affordability, with senior economist Paul Ryan saying it is the worst level on record.
That figure is down from almost half (around 49 percent) in 2020-21.
The PropTrack report also found that mortgage costs are as high as 2008 levels and only slightly below historic peaks reached between 1989 and 1990.
“A median-income household would need to spend a third of its income on mortgage payments to buy a median-priced home,” said PropTrack senior economist Paul Ryan.
‘Households at all levels of income distribution could afford the lowest proportion of housing on record over the past year, down sharply from just one year ago.
‘During this time, income growth has been insufficient to offset rapidly rising house prices and mortgage rates, meaning the typical Australian household can now afford just 14 per cent of all homes sold across the country.’
In July, research led by property experts Mustapha Bangura and Professor Chyi Lin Lee found that the average full-time income was no longer good enough to break into the property market anywhere in Sydney.
The couple found that nowhere in Sydney was affordable given the 2021 New South Wales median weekly income for part-time employees of $600, as well as the median weekly income for full-time employees of $1,500.
The study found that proximity to the city was a factor, with the closer the property was to Sydney’s CBD becoming more challenging for prospective homebuyers.
High mortgage rates and rising property prices have made most homes unaffordable for the average Australian.
Commenting on the PropTrack report, Mr Ryan said first-time homebuyers and renters are facing incredibly limited affordability just to enter the market.
“Mortgage rates have hit their highest level since 2011 and this has had a dramatic impact on housing affordability, reducing borrowing capacity by up to 30 percent for new borrowers and increasing repayments for existing borrowers by up to 50 percent in just two years,” he said.
Mr Ryan noted that housing affordability is expected to decline when interest rates fall, which could happen in the next six months.
He said significant improvement requires changes on multiple fronts.