A damning new report paints a tough look at housing affordability. Picture: RoyVPhotography.
Housing affordability across the country has never been worse.
That is the damning review from PropTrack’s Housing Affordability report.
The report – a comprehensive measure of the share of homes that households can afford to purchase – reveals housing affordability is at its worst level in at least three decades.
It paints a bleak view of the current state of the market as Australia moves towards next year’s election, commonly referred to as the “housing election”.
The report found a median-income household earning around $112,000 could afford just 14 per cent of homes sold throughout the 2023-24 financial year.
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Not a lot of Aussies can own a lot of homes.
PropTrack senior economist and report co-author Angus Moore said this was the smallest share since PropTrack’s records began in 1995, and is down from a more favourable 43 per cent just three years prior.
“We’re looking at the least affordable housing we’ve seen since at least the mid ’90s, and potentially even longer,” Mr Moore said.
“Unfortunately that there’s probably not a lot of great news for would-be buyers in here.”
“We haven’t seen as sharp a decline in the last year as we did in the years prior, but it has deteriorated further.”
In affordability terms, it’s the most difficult in Tasmania, New South Wales and Victoria, where median-income households have access to just 9 per cent of homes, New South Wales only slightly better with one in 10 within reach, and Victorian households able to access just 12 per cent of properties sold.
It’s even worse for renters, with renting households able to afford just 11 per cent of homes.
This contrasts to mortgage-holding households who can use the equity in their property to access 34 per cent of all homes sold nationally in FY23/24.
“To really illustrate it, in Tasmania, it’s as low as 6 per cent for those renter households, so it’s pretty challenging,” Mr Moore said.
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It can take the average Aussie as long as 20 years just to save for a home deposit. Picture: David Clark
The report also shows it will take the average Australian household 5.6 years to save a 20 per cent deposit needed to buy a median-priced home.
That blows out to the 6.5 years needed to save a 20 per cent deposit on a $1.5m median-priced home in New South Wales.
South Australia – which recorded the biggest decline in affordability over the past year – wasn’t far behind at six years, while Western Australia, Australia’s most affordable state, was the only place you can do it in under five years.
Here househunters need just 3.8 years to save a 20 per cent deposit.
“If you’re an average income household, and you save 20 per cent of your income, which is quite a substantial chunk, that’s not an easy thing to do,” Mr Moore says.
“It represents a very substantial chunk of your income.
“And many households that are buying are going to be getting that from family or from policies that allow you to purchase with a smaller deposit.”
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PropTrack economist Angus Moore says: We’re looking at the least affordable housing we’ve seen since at least the mid ’90s, and potentially even longer”.
Nationally, mortgage costs are as high as those seen in 2008 and only slightly below the historical peaks of 1989-1990, with an average-income household forwarding one third of their income straight to their lender.
Affordability is expected to ease when interest rates fall, which is anticipated within as soon as the next six months, however that won’t be enough to make significant change to those looking to break into home ownership.
But there is a way forward, Mr Moore said, praising particularly the Victorian and New South Wales Governments’ approach to housing reform and development approval, and suggesting other state’s follow their leads.
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“I think one of the pleasing things to come out of the current crisis is the fact we are seeing governments increasingly focused on ways to build more homes,” he said.
“We’ve got the national cabinet’s target to build 1.2 million homes, and while we’re not on track to hit that, the fact that we’re focusing on it is at least a start,” Mr Moore said.
“New South Wales and Victoria have put forward targets for building homes and look seriously at ways to encourage medium and higher density in the sort of areas where it’s needed, around train stations and the like – those are good moves that will help improve affordability, unfortunately, it takes time to build homes.
“It takes even longer to plan and get them approved. So it’s not going to fix it overnight, but we are at least focused in the right areas.
Australian Council of Social Services CEO Dr Cassandra Goldie AO said a number of things were needed to ease the current crisis.
“The most immediate relief that can be provided it to increase incomes – no question,” she said.
“We definitely need a large boost in public investment into social and affordable housing – the Government needs to stay the course on bigger investment in that area so we are providing housing which is tied to people’s income so it’s actually affordable for them.
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“We also think the tax breaks associated with property investment need to be reviewed so we are encouraging more institutional investors into the property market where they see that providing long-term good renting opportunities for people is turned into a decent housing option.”
With cost of living pressures and soaring rents, biopharmaceutical process engineer Alex Knight, 24, can see why young people aren’t moving out of home.
Dr Cassandra Goldie AO said a number of things were needed to ease the current crisis. Picture: Tony Gough
Mr Knight is currently building his first home in Bowden, South Australia.
But it’s not a goal he’s achieved overnight. Mr Knight first started saving when he was 15, while working at KFC.
He also got help through HomeStart’s graduate loan, which he said allowed him to get in the market earlier and buy a home he liked where he wanted to live.
“I always wanted a home – I didn’t want an apartment, I wanted a home and in the end I compromised and got a townhouse because the market was just so competitive,” he said.
“I really think it will turn out quite nicely, I just need to be patient.”
Set to move in this year, Mr Knight said it had been disheartening watching prices continue to rise as he tried to save.
“I don’t know how anyone moves out of home these days – it’s so rough out there.”
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