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While improved economic conditions saw lending activity rise for owner-occupiers in Western Australia over the first quarter of 2025, affordability challenges still persist for the state’s first home buyers.
The Real Estate Institute of Australia’s (REIA) latest Housing Affordability Report recorded 9,635 new loans to owner-occupiers in Western Australia during the March 2025 quarter, 9.6 per cent lower than the December quarter but 0.9 per cent higher than last year.
The average loan size for owner-occupiers registered at $594,250, which marked a decline of 0.8 per cent from the previous quarter, but sits 14.2 per cent higher than the size of $520,193 recorded at this time the year prior.
Over the March quarter, Western Australia remained Australia’s most affordable state, with only home owners in the ACT and the Northern Territory requiring fewer than 33.4 per cent and 34.8 per cent of family income to meet loan repayments, respectively.
Alongside the decrease in average loan size in Western Australia, data showed that the proportion of family income needed to meet loan repayments decreased 1.7 percentage points over the quarter to 40.8 per cent.
Real Estate Institute of Western Australia president, Suzanne Brown, said the improvement in affordability was a reflection of the effects of the interest rate reduction, and an increase in Western Australia’s median weekly family income.
“While Perth property prices have continued to increase, this has been offset by the 0.25 percentage point decrease in the cash rate in February, which has seen mortgage repayments decrease,” Brown said.
“At the same time, there has been a small increase in the median weekly income, up 1.1 per cent from $2,675 in the December 2024 quarter to $2,709 in the March 2025 quarter.”
“These factors have seen affordability improve,” she added.
Despite the recent easing in housing affordability in Western Australia, REIA’s data showed that the proportion of income needed to meet loan repayments was still 2.9 per cent higher than levels from the March 2024 quarter.
Brown highlighted that the annual decline in affordability was reflective of Western Australia’s strong price growth over the past 12 months.
“Perth’s median house sale price rose 22 per cent over the year to March to $775,000,” she explained.
“People have had to borrow more to purchase a home, which has seen the average mortgage increase, and therefore mortgage repayments increase,” Brown said.
First home buyer lending lags over the quarter
REIA’s report showed that conditions had also worsened for first home buyers (FHBs), who accounted for 35.8 per cent of the state’s owner-occupier loans during the March 2025 quarter.
The institute’s data showed that lending activity to FHBs in Western Australia fell month-on-month, with the 3,446 loans to first home buyers falling 10.5 per cent from the December quarter, and 9 per cent lower than levels from 12 months ago.
Additionally, the average loan size to first home buyers increased 1.9 per cent over the quarter to $506,965, which sits 11.5 per cent higher than the $454,795 recorded at this time the year prior.
Despite the annual decline in housing affordability within Western Australia, Brown highlighted the RBA’s most recent interest rate cut in May, which may improve the state’s home buying conditions during the June quarter.
Easing rental affordability reflects changing conditions in Western Australian market
Rental affordability in Western Australia also improved over the March quarter, with the proportion of family income needed to meet loan repayments easing by 0.3 percentage points to 35 per cent but still registering 1 percentage point higher than levels in March 2025.
Despite the annual decline in rental affordability, Brown said that the quarterly improvement reflected changing conditions in Western Australia’s rental market and an increase in the state’s median weekly family income.
“Over the past year we’ve seen new supply come to the market and the vacancy rate increase,” Brown said.
“This has eased the competition in the rental market and seen median rent price growth slow and prices record periods of stability,” she concluded.
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