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The proportion of income required to meet loan repayments increased to 37.3 per cent over the March quarter, according to new figures from the Real Estate Institute of Australia (REIA).
The industry body’s latest Housing Affordability Report indicated that Australians, on average, were already spending 0.2 per cent more of their income to service their mortgage at the start of the year, even before rates began to rise.
Now with the Reserve Bank of Australia announcing the largest single increase in the cash rate in 22 years – bumping it up to 0.85 per cent in June after the hike to 0.35 per cent in May – REIA president Hayden Groves issued a warning that housing affordability was in rapid decline.
“The cash rate sitting at 0.85 per cent will impact on households carrying a high amount of debt and will lead to an overall reduction in housing affordability by around -2.4 per cent,” Mr Groves said.
He noted that should the cash rate hit 2 per cent, as it’s predicted to do in the long-term, the proportion of income required to service a mortgage will rise on average by 6.2 per cent.
And according to the industry head, things aren’t looking any better for renters. In fact, while housing affordability had either improved or remained stable for buyers in NSW, the Northern Territory and the ACT in the first part of the year, it was down in every state across the country when it came to rental affordability.
“Rental affordability declined more than housing affordability with the proportion of income required to meet median rent increasing by 0.5 percentage points to 23.5 per cent. Rental affordability declined in all states and territories except the Northern Territory,” Mr Groves reported.
“Tasmania remains the most unaffordable state to rent with income to rent needed sitting at a huge 30.8 per cent.”
And the influx of those transitioning from renting to owning for the first time was significantly decreasing, according to the data.
“First home buyers now make up 31.6 per cent of owner occupier dwelling commitments, a decrease of 2.7 percentage points over the quarter and 8.7 percentage points over the year. The number of first home buyers fell over the March quarter in all states and territories,” Mr Groves noted.
Declines ranged from 10.5 per cent in Western Australia to 40.2 per cent in the Northern Territory.
Over the quarter, the average loan size rose to $603,395, an increase of 2.1 per cent over the three-month period and an increase of 19.2 per cent over the past 12 months.
“This is the largest annual increase since the current ABS series began in 2022,” Mr Groves noted.
He commented that now the country had decided on its new government, the time had come to “get to work on the fundamentals of housing supply and affordability for Australia’s renters, first time buyers and home owners”.
The industry is eagerly awaiting more news of the Labor government’s promised National Plan for Housing, and Mr Groves said that given the increasing pressures facing everyday Australians, he was sure that they, too, were hoping such a plan would bring about substantial change.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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