Australians are at risk of being priced out of the property market according to the Real Estate Institute of Australia's latest (REIA) Housing Affordability Report.

The report found that housing affordability continued to decline in the December quarter of 2021, with the proportion of income required to meet home loan repayments reaching 37% - above the commonly-accepted marker for mortgage stress, 30%.

The proportion of income required to meet median rent also increased to 23%, which is up 0.1% over the quarter and 0.3% over the year.

Housing affordability declined in most states and territories, from 0.1 percentage point in WA to 5.9 percentage points in NSW.

REIA President Hayden Groves said housing affordability is a key issue for homeowners and renters alike and, given interest rates rises are looming, the situation could worsen.

"We are urging governments to get on the front foot with this issue by prioritising housing supply shortages which is the most effective way of getting affordability under control," Mr Groves said.

"Over the December quarter, the average loan size increased to $590,482, an increase of 3.5% over the quarter and an increase of 17.7% over the past 12 months.

"This is the largest annual increase since the current series began in 2002."

Godfrey Dinh, Futurerent CEO and Founder, said property investors should brace for the prospect of a rate hike by reassessing their cash flow position.

"Property investors haven’t stomached a rate hike in the past 12 years and have enjoyed relatively low mortgage repayments in recent times," Mr Dinh said.

"It’s a good time to think about how higher mortgage repayments could impact their household budgets."

Fewer first home buyers in-market

The number of first home buyers fell by 0.4% to 37,620 in the December quarter - this brings the decrease in first home buyers to 7.8 percentage points throughout the year.

First home buyers now make up 34.1% of owner occupiers, and they're borrowing more to enter the property market.

"The average loan size for first home buyers increased to $470,548," Mr Groves said.

"This was an increase of 2.5% over the quarter and an increase of 12.9% over the past 12 months."

The average loan size increased in all states except Tasmania, where it decreased by 0.4 percentage points.

"Increases ranged from 0.8% in Western Australia to 2.9% in both New South Wales and Victoria," Mr Groves said.

Western Australia dubbed as 'most affordable' state for housing

Western Australia is the second most affordable state to buy and the most affordable state to rent according to the REIA report.

Specifically, 26.2% of household income is required for home loan repayments and 19.7% of household income is required for rent.

Northern Territory was the most affordable spot to buy, with 25.1% of household income required for mortgage repayments, but it's the third most expensive place to rent with 25.9% of household income needed.

Real Estate Institute of Western Australia (REIWA) President Damian Collins said housing in WA is very affordable for most people.

"We have some of the most affordable housing in the country and the highest proportion of first home buyers in our owner-occupier market of any place in the country at 39.3%, which is very encouraging," Mr Collins said.

"While in other parts of the country, the dream of home ownership is out of reach for many people. Particularly in places like NSW where close to half of the state’s median weekly family income is required to service loan repayments - that is simply not the case in WA." 


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured 4.6 Star Customer Ratings
  • No monthly or ongoing fees
  • Unlimited free redraw
  • No application fee
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
Principal & Interest
Featured Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *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. Rates correct as of . View disclaimer.

Image by Christopher Burns on Unsplash

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