Housing affordability improves for the first time since 2021 – new data reveals

Housing affordability for home buyers has finally turned a corner with the March quarter of 2024 showing improvement for the first time in three years, according to the latest data from the Real Estate Institute of Australia (REIA).

But it's really a tale of two cities.

REIA President, Leanne Pilkington, highlighted that while housing affordability has improved, Australians continue to feel the pain with rental affordability declining and the number of first-home buyers falling.

The good news for home buyers

The good news for home buyers is that the proportion of income required to meet average loan repayments fell by 1.0 percentage points to 46.7%.

This improvement is thanks to stronger wage growth and a pause on interest rate hikes.

Ms Pilkington said:

"This is the first improvement in housing affordability since the successive increases from the March quarter of 2021 through to the December quarter of 2023, where this figure peaked at 47.7%."

Housing affordability improved in:

• New South Wales,
• Victoria,
• Tasmania, and
• the Australian Capital Territory

Meanwhile, it remained stable in South Australia and declined in Queensland, Western Australia, and the Northern Territory.

The improvements ranged from 2.2 percentage points in New South Wales to 0.9 percentage points in Victoria and the Australian Capital Territory.

The struggles with rental affordability and first-home-buying challenges

According to the data, despite the gains for home buyers, rental affordability declined across the country.

Nationally, the proportion of income required to meet median rents increased by 0.5 percentage points over the quarter to 24.4%.

Rental affordability worsened in all states and territories, with declines ranging from 0.2 percentage points in Victoria to 0.7 percentage points in Tasmania.

Meanwhile, the number of first home buyers decreased to 25,824, a drop of 17.9% over the quarter, though it marked an 8.3% increase compared to the March quarter of 2023.

First-home buyers now make up 36.7% of the owner-occupier dwelling commitments, a decrease of 0.9 percentage points over the quarter but an increase of 1.5 percentage points over the year.

The Reserve Bank of Australia maintained the official cash rate at 4.35% throughout the March quarter.

The quarterly average standard variable interest rate stayed stable at 8.8%, and the quarterly average 3-year fixed rate remained at 6.8%.

Variations across states and territories

The REIA report shows that over the March quarter, the number of first-home buyers decreased in all states and territories.

Western Australia saw the smallest decrease (-11.5%), while the Northern Territory experienced the largest (-35.9%).

With only 150 loans made to first-home buyers, the Northern Territory continues to be the nation's smallest market.

The average loan size for first-home buyers increased to $518,510, a rise of 0.7% over the quarter and 6.9% over the past twelve months.

This average loan size increased in all states and territories except Victoria, which saw a 0.4% decrease.

Western Australia had the largest increase (4.1%), and New South Wales had the smallest (0.1%).

Overall loan trends

The report highlights that the total number of owner-occupied dwelling loans decreased to 70,374, a 15.8% drop over the March quarter but a 4.0% increase over the past year.

The number of loans for owner-occupiers decreased in all states and territories over the March quarter, with decreases ranging from 7.4% in Tasmania to 35.9% in the Northern Territory.

Over the March quarter, the average loan size decreased to $607,095, a 1.1% drop, but it increased by 3.5% over the past 12 months.

The average loan size increased in Queensland (1.1%), South Australia (0.9%), Western Australia (3.7%), and the Northern Territory (1.3%).

Decreases ranged from 0.1% in Victoria to 2.9% in New South Wales.

Over the past year, the average loan size increased in all states and territories except Victoria.

Ms Pilkington concluded:

"While there are positive signs for home buyers, the rental market continues to pose significant challenges for many Australians.

It's a mixed bag of improvements and ongoing struggles."

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.