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Not even 1 in 5 homes affordable as data paints ‘stark’ property picture: NAB economist

By Orana Durney-Benson
22 April 2024 | 9 minute read
home sale sign reb rxawia

Just 13 per cent of homes for sale are affordable for the average Australian household – and the impacts are being felt across the board.

In a recent online panel on the state of Australia’s property, NAB senior economist Gareth Spence revealed that less than one in five homes currently on the market are within reach for the average Australian household.

The benchmark for affordability is spending no more than 25 per cent of gross household income on housing, but this is a far cry from the realities facing most Australians.

“Affordability has declined quite sharply,” said Spence. “It’s quite stark.”

In Sydney, for example, dwelling values are now 25.4 per cent higher than they were at the onset of the COVID-19 pandemic in March 2020.

Rents are also rising steeply in the harbour city, with houses seeing 9.1 per cent annual growth, and unit rents shooting up 9.4 per cent.

In contrast, wages have grown just 4 per cent over the past year, according to NAB data. This is “its strongest rate in around a decade”, said Spence, but it is still a far cry from the rate of housing cost increases.

Given this, it’s unsurprising that many households are under severe financial pressure.

Over the last six quarters, household disposable income has experienced consistent declines, a trend which Spence noted is “quite unusual”.

“Savings have fallen quite a bit over the last year as household budgets have been pressured, and income growth has slowed a little,” he said.

Discretionary spending has also fallen significantly, according to data from NAB. Australians are cutting back on eating out at restaurants, donating to charity, going on holiday and subscribing to streaming services.

More concerningly, Australians are also cutting back on essentials they are driving less to save on petrol, cutting back on insurance, and even skipping meals to save money.

While everyone is feeling the pinch to some extent, some groups are facing clearly heightened levels of financial stress.

“As expected, it’s those that are unemployed, low incomes, renters, and those with higher cost structures in their households that have very much [gone headfirst] into this pressure,” said Spence.

Ironically, it is in areas where household incomes are lower that housing costs have seen the steepest rises.

In Sydney, house prices have risen substantially in the south-west, Parramatta and the Ryde area; but prices in the eastern suburbs, north shore and harbourside suburbs have actually decreased in recent months.

“It’s in the south, south-west and outer-west Blue Mountains areas that are recording the strongest growth on a quarterly basis,” said Mark Browning, NAB head of valuations.

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