Homeownership Dreams Fading: Affordability Hits Record Low

While headlines have focused on falling house prices following changes to tax policies, a new report from realestate.com.au paints a concerning picture: housing affordability in Australia has reached its lowest point on record.

The data reveals that even households with a median income of approximately $125,000 per year are now only able to afford roughly 12% of homes currently being sold. This is a significant drop from the previous low recorded during the Global Financial Crisis in 2007-2008, when affordability stood at 14%. The challenging economic environment is putting immense pressure on potential buyers.

Adding to the strain, Australian families are dedicating a larger portion of their income to mortgage repayments. Currently, an average household spends 35.5% of its income servicing a mortgage – the highest percentage since 1989, when interest rates peaked at over 15%. This combination of high prices and rising interest rates is lengthening the timeframe for Australians to save enough for a deposit.

According to realestate.com.au's senior economist Angus Moore, price declines are primarily concentrated in the more expensive segments of the market. While property values have been falling for five consecutive months, Moore attributes this trend largely to rising interest rates. He notes that prices were already decreasing prior to recent budget changes.

Moore explained that investors typically focus on more affordable properties, meaning those are proving relatively resilient compared to the premium end of the market which is experiencing steeper price drops. While the government anticipates its policy adjustments will contribute to improved affordability, the anticipated impact is described as modest.

For families striving to save a 20% deposit, the timeline for achieving homeownership has stretched from 5.8 years to six years – highlighting the increasing difficulty of entering the Australian property market.