Overview of Housing Affordability in 2024-2025
Housing affordability in Australia has seen only a slight improvement over the past year, remaining near record low levels. Despite temporary relief in the form of higher incomes and lower mortgage rates during the 2024-25 financial year, the overall forecast remains bleak, with expectations that affordability will decline further by 2026.
Current State of Housing Affordability
According to the annual PropTrack Housing Affordability report, the situation for median-income households shows a marginal increase in the percentage of homes that they can afford. In the financial year ending 2025, a median-income household with an income of approximately $118,000 could afford around 15% of homes sold, up from merely 11% the previous year. However, this improvement is not broad-reaching, particularly for lower-income households, with those at the 30th income percentile reportedly able to afford just 3% of homes sold.
Factors Influencing Current Trends
REA Group’s senior economist, Angus Moore, highlighted that several factors contributed to the modest improvement in the housing market. Notably, an increase in income and several interest rate cuts by the Reserve Bank of Australia (RBA) helped to reduce borrowing costs, thus boosting borrowing capacity for many Australians. Yet, regions like New South Wales and South Australia continue to bear the brunt of affordability challenges.
Over the past year, the Reserve Bank has reduced interest rates three times, bringing them down to 3.6%. While this has trimmed mortgage costs and eased some financial burdens, home prices have risen sharply, further complicating the landscape. As of October 2025, the national median home price increased by 7.5% to $858,000.
Challenges to Homeownership
Despite these slightly improved conditions, the report emphasizes ongoing hurdles surrounding mortgage serviceability and the ability to save for a deposit. An average-income household aiming to save a 20% deposit on a median-priced home would need nearly 5.8 years of savings, showcasing the uphill battle many potential buyers face.
The Real Estate Buyers Agents Association of Australia (REBAA) president, Melinda Jennison, pointed out that first-home buyers in cities like Brisbane, Perth, and Darwin are feeling the crunch. High property prices coupled with elevated rental costs make it especially challenging for these buyers to save the necessary deposits.
Government schemes, such as the First Home Buyers Guarantee, offer some relief, enabling eligible buyers to enter the market with as little as 5% saved. However, Jennison noted that difficulties with mortgage serviceability criteria remain a significant barrier. The more stringent lending requirements continue to hinder potential buyers, especially those lacking parental support or possessing irregular incomes.
Burden of Mortgage Repayments
According to the report, the average-income Australian household now spends about 32.7% of their income on mortgage repayments for a median-priced home, which is a slight drop from the peak of 34.3% recorded in mid-2024. While this decrease may appear encouraging, it still indicates an ongoing challenge for buyers navigating a difficult housing market.
Predictions for Future Affordability
Experts, including Jacob Caine from the Real Estate Institute of Australia (REIA), warn that the trajectory of housing affordability is likely to worsen, particularly as ongoing home price growth, rising rents, and historically low vacancy rates contribute to a tightening housing market.
Caine suggests that addressing the supply side issues by increasing the availability of affordable housing is key to achieving any improvement in affordability. Proposed solutions include faster planning processes, promoting diverse housing types, and better investment in social and affordable housing. While such reforms may eventually help, the immediate future points toward continued pressures on affordability.
Some optimism exists in the form of new planning reforms and upcoming social housing programs. However, these changes are projected to yield gradual impacts against the impending pressures of inflation and rising interest rates. Given that the gap between wages and housing prices continues to widen, especially for first-home buyers without additional support, the outlook remains dim.
The consensus among experts, including Moore, is that while temporary rate cuts may help sustain some levels of price growth, affordability will remain extremely challenged in the coming year. Unless substantial changes occur in income levels and housing supply, many buyers will continue to face significant obstacles in their pursuit of homeownership.
