Typical Aussie household can only afford 14 per cent of all homes sold as housing affordability plunges to ‘worst on record’

Housing affordability in Australia has deteriorated to its “worst level on record” – driven by high mortgage rates and increasing home prices.

The grim finding in the latest PropTrack Housing Affordability Report means a typical median-income household – earning around $112,000 – can afford just 14 per cent of homes sold across the country.

That figure marks the smallest share of homes since records began in 1995, with the share declining from 43 per cent in just three years.

NSW, Tasmania and Victoria were named the states with the worst housing affordability rate.

The report found a median-income household could afford just 10 per cent of homes sold in NSW, which also had mortgage costs higher than anywhere else in Australia.

PropTrack’s report found South Australia recorded the biggest decline in affordability over the past year – a median-income household there only able to afford 16 per cent of homes sold over the last financial year.

That figure is down from almost half (49 per cent) in 2020-21.

PropTrack’s report also found mortgage costs are as high as 2008 levels and only just below historical peaks reached over 1989-90.

“An average-income household would need to spend a third of their income on mortgage repayments to buy a median-priced home,” PropTrack senior economist Paul Ryan said.

“Households across the income distribution could afford the smallest share of homes on record over the past year, with a noticeable decline from just a year ago.

“In this time, income growth has been insufficient to offset rapidly rising home prices and mortgage rates, meaning the typical Australian household can now afford only 14 per cent of all homes sold across the country.”

In July, research led by property experts Mustapha Bangura and Professor Chyi Lin Lee found the average full-time income was no longer good enough to enter the housing market anywhere in Sydney.

The pair found nowhere in Sydney was affordable based on the 2021 NSW weekly median income for part-time employees of $600 – as well as the weekly median income for full-time employees of $1500.

Proximity to the city was found to be a factor in the study, with it more challenging for prospective homebuyers the closer the property is to Sydney’s CBD.

Commenting on PropTrack’s report, Mr Ryan said first home buyers and renters faced incredibly stretched affordability just looking to get into the market.

“Mortgage rates hit their highest level since 2011 and this has had a drastic impact on housing affordability – reducing borrowing capacities by as much as 30 per cent for new

borrowers and increasing repayments for existing borrowers by up to 50 per cent in just two years,” he said.

Mr Ryan noted housing affordability was expected to ease when interest rates fall – which could happen in the next six months.

But he said meaningful improvement required change on multiple fronts.