The great Australian dream of owning a home is now harder to achieve than three decades ago, with a new index revealing the grim reality in each state.
Elizabeth Tilley – @liztilley84
2 min read
September 2, 2023 – 6:00AM
News Corp Australia Network
It’s official: the great Aussie dream of owning a home is now harder to achieve than at any time in the last three decades, with even households earning $200,000 struggling to get into the property market.
Alarming findings from PropTrack’s Housing Affordability Index, launched Saturday, show affordability across the nation has plunged to its worst level on record, across multiple metrics.
The Index reveals the share of homes a typical household can afford to buy has never been lower, thanks to a sharp rise in mortgage rates and increasing home prices.
A median-income household, earning $105,000 a year, can afford the smallest share of homes since records began in 1995, at just 13 per cent.
Even high-income households, earning $200,000 or more a year, could only afford to own about half the number of homes sold in 2022/23.
Low-income households are facing incredibly stretched affordability. The lowest 20 per cent of income-earning households, earning $47,000, could afford just one per cent of homes.
Of all the states, New South Wales (NSW) is officially the least affordable for housing, with the time it takes to save a deposit there close to seven years.
Perhaps surprisingly, Tasmania is the second least affordable state behind NSW — a stark turnaround from only a decade ago when it was the most affordable of all the states.
It has never been more unaffordable to own a home in South Australia, and it’s the same situation in Victoria, which has experienced a severe decline in affordability since 2020.
Unlike most other states, Queensland’s housing affordability has actually improved slightly from its record low in 2007/08, but has continued to decrease steadily in recent years.
PropTrack senior economist Angus Moore said the situation was especially challenging for first-home buyers — particularly young people in the 25 to 34-year-old age bracket, who could afford fewer than 30 per cent of homes.
“Mortgage interest rates have increased extremely rapidly from the record lows in 2020 and
2021, following RBA rate hikes that began in May 2022,” Mr Moore said.
“This has caused the sharpest increase in mortgage rates since the mid-1980s and has reduced borrowing capacities by as much as 30 per cent for new borrowers.
“At the same time, existing borrowers, which make up around a third of Australian households, have faced sharp increases in mortgage repayments. A typical recent borrower now faces repayments as much as 50 per cent higher than in early 2022.”
The Index found servicing a mortgage is also close to as hard as it has ever been, only just below the peak reached in 1989 when interest rates climbed as high as 17.5 per cent.
A household earning average income would need to spend a third of their income on mortgage repayments to buy a median-priced home.
At the same time, Mr Moore said sharply higher price growth throughout the pandemic had meant housing accessibility — how long it takes new buyers to save a deposit — remained incredibly challenging.
The average time taken to save a deposit peaked in 2021/22 at six years — compared to less than three years in 1990 — but interest rates were also at record lows.
The PropTrack index measures affordability based on the share of homes households can afford to purchase across the whole income distribution, using data dating back to 1995.
It assumes the household already has a 20 per cent deposit, spends 25 per cent of their gross income on mortgage repayments, and takes into account the prevailing average mortgage rate (currently 5.94 per cent) plus a buffer rate.