Aussies earning a normal income will only be able to afford one in seven homes in the country. Experts warn that housing affordability is close to record lows, despite recent interest rate cuts taking some of the interest off repayments.
PropTrack’s latest Housing Affordability Index, released Friday, found there has been little material improvement in affordability this year and prices remain drastically less affordable than during the height of the pandemic in 2021.
Part of the reason is that price increases have offset many of the benefits of cheaper loans.
PropTrack noted that a household earning the national average income of $118,000 per year would be able to afford only 15 percent of all homes sold in the 2025 financial year.
Households in NSW and South Australia faced some of the country’s most challenging affordability challenges, with middle-income households in those states only able to afford 11 per cent and 10 per cent of homes.
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Homeowners in NSW pay the highest mortgages in the country. Image: iStock
Mortgage costs for homeowners in NSW, measured as a percentage of average income, also now remain higher than at any time since the 1990s. They typically require about 38 percent of a household’s annual income from the typical state income.
Nationally, the picture was similar: a middle-income Australian household would have to spend a third of their income (32.7 percent) on mortgage repayments to buy a median-priced home. That’s a slight decline from 2023, but still high by historical standards.
PropTrack economist Angus Moore said house hunters across the country were experiencing “challenging conditions”, with house prices rising and interest rates still at “very high levels” despite this year’s rate cuts.
“Higher mortgage costs and much higher house prices mean that the cost of servicing a mortgage has risen much faster relative to incomes,” he said.
For a median priced home in NSW, homeowners spend just under 38 percent of their annual income on mortgage repayments.
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A greater housing supply would moderate house prices. Photo: Jonathan Ng
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With the state’s median household income at $120,000, that amounts to a total of $45,600 per year for homeowners, on top of the high prices of goods and services.
While NSW residents pay more for their mortgage repayments than anywhere else in the country, PropTrack found other states have surpassed them in some measures.
NSW is not the least affordable state for mortgages as a percentage of income, with South Australian households spending an even higher 40 per cent of their wages on home loan repayments.
South Australians are also taking the longest to save a 20 per cent deposit for a home with an average price of 7.2 years, thanks to rising prices that have pushed housing affordability to a record low for the state, according to PropTrack.
NSW ranks second in this metric, with buyers needing to save the equivalent of 6.8 years to put down a deposit on a median-priced home, up from 6.5 years in 2023-24, PropTrack reports.
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According to PropTrack, South Australians contribute the majority of their income to mortgage repayments.
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In Queensland, mortgage repayments remain at their highest in fifteen years.
Meanwhile, Western Australia was ranked as Australia’s most affordable state, although mortgage repayments have returned to the same levels as 2011, when the state’s mining boom sent property prices soaring.
Victoria was an outlier as affordability improved over the year, with falling mortgage rates and rising wages making more homes affordable to more households.
In contrast, NSW was ranked as the most unaffordable property market overall by PropTrack.
In NSW, middle-income home seekers can afford just 11 per cent of state property prices, with Moore saying interest rate cuts have been offset by rising property prices.
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PropTrack economist Angus Moore says affordability will remain a challenge for homebuyers.
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Conditions remain particularly challenging for lower-income buyers, who could afford only about 3 percent of all homes sold nationwide in the past year and are taking longer to save for a down payment.
While interest rate cuts and rising incomes have actually improved affordability marginally over the past year, Moore said this is largely offset by the fact that home prices have also risen.
Mr Moore said it was rare for NSW to be eclipsed in terms of unaffordability.
“NSW is clearly driven by Sydney – a very expensive housing market – making it the least affordable state in Australia,” he said.
“It may not happen every year, but New South Wales is generally the least affordable state in Australia.”
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Low-income households in NSW could only afford about 3 per cent of all homes sold nationally last year. Photo: NCA NewsWire/Nicholas Eagar.
On top of mortgage repayments, the consumer price index rose to 3.8 percent in October, an inflation level not seen since June 2024.
Mr Moore said he expected affordability to remain a challenge across Australia in 2026.
“We expect house prices to continue to rise across the country next year, and while incomes will also grow and we may see a reduction in interest rates, the balance between these things is unlikely to materially improve affordability,” he said.
“We may see small improvements, but we probably won’t get back to the levels of a few years ago.”
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