Housing affordability hits all-time low despite falling property prices

Housing affordability reached an all-time low in the country despite a decline in property prices, according to the latest data. Households earning a typical income of $125,000 annually could only afford about one in every 10 homes sold across the nation. Mortgage repayments have become a significant burden, accounting for 35.5% of average household income, surpassing the levels seen during the Global Financial Crisis when it was 33.3%.

Economists attribute the declining affordability to the central bank's increase in borrowing costs, which has constrained household borrowing capacity amid the already challenging cost of living. Three rate hikes by the Reserve Bank of Australia (RBA) in February, March, and May have further worsened the situation. The Grattan Institute's analysis of HILDA data revealed that affordability declined in every state during the last financial year, with South Australia becoming the least affordable state at just 7% of properties sold affordable for median households. Victoria, on the other hand, had the highest rate at 16%.

The Grattan Institute highlighted that the average Australian household earns $161,000, emphasizing the skewed nature of the median figure used in the report. Economist Luc Redman noted that despite a recent fall in property prices, the pressure remains due to a clear structural supply problem. The country lacks sufficient homes, especially in well-located areas, and without meaningful reforms to address supply, the situation will persist over the long term.

Advocacy groups, such as Everybody's Home, call for changes to negative gearing and capital gains tax discounts to reduce attractiveness for property investors. They also advocate for limiting rent increases and boosting social housing to provide more affordable options. Legal service Mortgage Stress Victoria has seen a significant increase in demand for assistance, with a 30% rise in the number of people seeking help compared to the 2025 monthly average.

They urge those struggling with mortgage repayments to contact their lenders for support, although not all lenders are legally obligated to provide assistance.