Housing affordability declines as property prices continue to rise

Western Australian housing and rental affordability declined over the June quarter.

The latest Real Estate Institute of Australia (REIA) Housing Affordability Report showed the proportion of family income required to meet loan repayments in WA increased 1.7 per cent over the quarter to 39.5 per cent, based on a median weekly family income of $2630 and an average monthly loan repayment of $4504.

A year ago, 12 interest rate rises saw mortgage repayments increase by nearly 50 per cent, which affected housing affordability at the time.

However, interest rates have been stable since November 2023, and what we’re now seeing is the effect of strong price growth on affordability. The Perth median house price increased 20.5 per cent in the year to June, which has seen the average mortgage increase 16.1 per cent over the same period, according to the report.

Price growth is being fuelled by strong demand from population growth and limited supply from low building completions.

Declining affordability has not deterred WA homebuyers, with loan activity increasing over the June quarter.

The total number of loans to owner-occupiers increased 13 per cent over the three months to June and 7.1 per cent over the year to 10,836.

First homebuyers were particularly active, making up 38.1 per cent of the owner-occupier market.

WA recorded the largest percentage increase in owner-occupier loan size of any state or territory over the quarter and year to reach $546,964. This was 5.3 per cent higher than the March quarter and 16.1 per cent higher year on year.

Rental affordability

Rental affordability in WA declined marginally over the quarter, with the proportion of family income needed to meet rent payments rising 0.6 per cent to 23.6 per cent. This was 1.8 per cent higher than the same time last year.

Changing market conditions indicate rental affordability will stabilise over the remainder of the year.

The REIA report covers the three months to June, however reiwa.com data to the end of August shows median weekly house and dwelling rent prices have been unchanged at $650 since March, while median weekly unit prices have been $600 for five of the past six months.

This is a result of changes to both demand and supply.

On the supply side, we’re seeing investor-owned new builds come to the market, which is adding new supply. In addition, some tenants are having their long-awaited new homes completed, allowing them to move out and free up some established homes.

We’ve also seen the nature of demand change, with an increase in tenant household sizes as people seek to share the cost burden of renting. People are also choosing not to rent, if possible.

You can read the full report on reiwa.com.