Housing and rental affordability declines

  • By Zilla Efrat

Housing and rental affordability have fallen across Australia as limited stock levels, inflation and interest rate rises continue to create trepidation in the market, the latest Real Estate Institute of Australia (REIA) Housing Affordability Report has found.

REIA president Hayden Groves believes that the Reserve Bank of Australia’s announcement of further interest rate hikes is likely to lead to further declines in housing affordability but adds that rates remain historically low and will hopefully help slow rising inflation.

Groves reveals that housing affordability declined over the March quarter of 2022, with the proportion of income required to meet loan repayments increasing to 37.3 per cent, an increase of 0.2 percentage points.

Groves adds: “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.

“Tasmania remains the most unaffordable state to rent with income to rent needed sitting at a huge 30.8 per cent.”

Groves says the number of first home buyers decreased to 29,093, a drop of 22.5 per cent during the March quarter and a fall of 33.9 per cent over the past 12 months.

“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.”

According to Groves, the average loan size to first home buyers increased to $475,544. This was a rise of 0.9 per cent over the quarter and an increase of 11.7 per cent over the past 12 months.

“Over the March quarter, the average loan size rose to $603,395, an increase of 2.1 per cent over the quarter 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 2002,” says Groves.

“With the Federal Election 2022 now behind us, it is time to get to work on the fundamentals of housing supply and affordability for Australia’s renters, first time buyers and home owners.”