Homebuyers facing biggest problem since 1995

Homebuyers are facing major affordability issues.

A composite image of people lining up to inspect a rental property and a row of terrace houses in an Australian inner-city suburb.
Aussies looking to buy a house may find they have limited options. (Source: Getty / AAP)

Housing affordability in Australia is now at its worst level in at least three decades, according to a new report.

Households earning the median income can afford the smallest share of homes since 1995 - when records began.

Households earning the median income of just over $105,000 could only afford 13 per cent of homes sold in the past year, the PropTrack Housing Affordability index found.

Unsurprisingly, affordability is the toughest in New South Wales, with the typical-income household only being able to afford just 7 per cent of homes.

But things are much worse for households earning under six figures. A household earning $64,000 per year could afford just 3 per cent of home sales.

Servicing a mortgage is close to as hard as it has ever been, only just below the peak reached in 1989, PropTrack said.

A household earning the average income would need to spend a third of that on mortgage repayments on a median-priced home.

“Surging home prices throughout the pandemic and rapidly rising interest rates over the past year have brought housing affordability to its worst level in at least three decades. The situation is especially challenging for lower-income households and first-home buyers,” PropTrack senior economist Angus Moore said.

“Mortgage interest rates have increased extremely rapidly from the record lows in 2020 and 2021, following RBA rate hikes that began in May 2022. 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.”

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