Australia's housing affordability worsens by 2% in December

author-avatar By on March 05, 2020
Australia's housing affordability worsens by 2% in December

Photo by Joseph Marcus on Unsplash

The Reserve Bank may have cut the cash rate four times recently, but this has seemingly done nothing to improve housing affordability.

According to the Real Estate Institute of Australia (REIA) Housing Affordability Report for the December 2019 quarter, affordability declined by 2%.

This is after the three rate cuts occurring in June, July and October of 2019. 

To put that into perspective, this means the proportion of income required to meet home loan repayments has increased to 34.7%.

Housing affordability worsened across the country, with the exception of quiet achiever the Northern Territory, where affordability improved. 

"It's still very difficult for first home buyers," REIA president Adrian Kelly told 7.30.

"It's very difficult for them to access all of that large amount of money at the one time."

Thinking about refinancing to a low-rate, variable owner-occupier home loan? Below are a handful of low-rate loans on the market. 

New South Wales housing affordability

New South Wales remains the least affordable state in Australia to buy a home.

Housing affordability declined by 3% over the December quarter, with borrowers needing to devote almost half of their income (42.8%) to meet their home loan repayments.

That's 8.1% higher than the national average. 

With Sydney's median house price expected to surge by $100,000 this year, those figures are likely to get worse. 

Despite housing affordability worsening in New South Wales, the number of loans to first home buyers spiked by 5.6% over the quarter. 

Sydney also remains the most expensive city to rent, with a median rent of $574 per week.

While that sounds expensive, it's actually cheaper than it was a year ago when the median rent was $582 per week. 

Victoria housing affordability

Borrowers in Victoria will need to devote 36.5% of their income towards home loan repayments, an increase of 1.9% over the quarter. 

The number of loans to first home buyers in Victoria increased by 14.1% over the quarter and a big 18% increase compared to the previous December quarter.

According to the report, first home buyers make up 40% of the state's owner-occupier market while the average first home buyer loan was $426,308 - a 10% increase from the December 2018 quarter. 

Melbourne's median house price is tipped to soar by 8% this year and a further 3-5% in 2021.

If those forecasts pan out, Melbourne's median house price will hit the $1 million mark in 2021. 

Queensland housing affordability

Queenslanders with a mortgage will need to set aside just over 30% of their income to meet their home loan repayments, an increase of 1% over the quarter.

First homer buyers are rife in the sunshine state, with an 8.1% increase in loans made to first home buyers. The average loan size for a first home buyer was just over $361,000.

Rental affordability was also down for the December quarter, with households needing to devote 22.1% of their incomes to make the median rent of $440 per week. 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Emma joined Savings.com.au as a Finance Journalist in 2019. She is a journalist with more than five years experience across print, broadcast and digital media, with previous stints at Style Magazines, 4ZZZ radio, and as editor of The Real Estate Conversation. She's most passionate about improving the financial literacy of young women and millennials by writing about complex financial topics in a way that's easy for the average Joe (or Jill) to understand. When she's not writing about finance she's watching Greys Anatomy (again).

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