Australian Housing Affordability Plummets to Record Low

Housing affordability remains one of the biggest challenges facing Australian households, with data from the Real Estate Institute of Australia showing that mortgage repayments were consuming almost half of median family income by the September quarter of 2024.

REIA’s Housing Affordability Report found that 48.6% of median family income was required to meet average home loan repayments during that quarter, up 0.4 percentage points from the previous quarter. At the time, this represented the worst housing affordability result recorded since REIA began monitoring the measure in 1996.

The figures highlight how strongly higher interest rates and larger mortgages can affect household budgets. Even when property prices soften, buyers can remain under significant pressure because a higher interest rate reduces borrowing capacity and increases the monthly cost of servicing a loan.

For first-home buyers, this creates a difficult balancing act. Lower prices may improve the purchase opportunity, but loan repayments can still take up a large share of household income. Saving a deposit, paying stamp duty and other upfront costs, and maintaining an emergency buffer can become increasingly challenging when mortgage servicing costs are already high.

The affordability pressure is particularly relevant to Melbourne’s western growth corridor, where many first-home buyers and families look for more affordable alternatives to inner and middle-ring suburbs. Areas in Melbourne’s west can offer lower entry prices, newer housing and a wider range of house-and-land, townhouse and unit options, but buyers still need to assess whether repayments remain sustainable over the long term.

Upgraders face a similar challenge. A household may have built equity in its existing property but still find that moving to a larger home requires taking on a significantly larger mortgage at today’s higher interest rates. This can delay upgrade decisions and reduce demand for more expensive homes.

Government support programs can help some buyers enter the market with smaller deposits or lower upfront barriers, but affordability is broader than the deposit alone. Buyers also need to consider ongoing repayments, living expenses and how their budget would cope if financial conditions changed.

Innovative finance structures, shared-equity programs and first-home buyer assistance can therefore play an important role, but they should be assessed carefully against each household’s long-term financial position.

For sellers in Melbourne’s western growth corridor, affordability constraints can also influence buyer behaviour. Properties priced above the borrowing capacity of the local buyer pool may take longer to sell, while homes that remain within realistic first-home buyer or family budgets may attract stronger interest.

Investors should also be aware that affordability pressures can affect both property prices and rents. If households are unable to buy, rental demand can remain strong, but there is still a limit to how much tenants can afford to pay.

Overall, the REIA data shows how important borrowing costs have become in shaping Australia’s housing market. For buyers in Melbourne’s western growth corridor, the key issue is no longer simply whether a property price appears affordable, but whether the total mortgage commitment can be comfortably managed over time.

The current environment reinforces the value of realistic budgeting, strong financial buffers and careful comparison of finance options before entering the market.