Housing affordability in Australia is improving, but only marginally.
The Real Estate Institute of Australia’s (REIA) latest Housing Affordability Report for the June quarter of 2025 finds affordability for buyers and renters has improved for a second consecutive quarter.
The details
The REIA report says the proportion of the median family income required to meet average loan repayments fell to 47.7% in the three months to the end of June.
This is an improvement of just 0.3% over the quarter and 0.5% compared with a year ago.
“It’s encouraging to see housing affordability improving for Australian families, particularly after the challenges we reported just six months ago,” REIA President Leanne Pilkington says.
The REIA says the improvements in affordability were supported by the Reserve Bank of Australia’s decision to cut the nation’s official cash rate by 0.25% in May 2025, lowering it to 3.85%.
(The RBA cut rates again in August to 3.6%, but the impact of this cut on affordability won’t be apparent until the REIA’s September quarter 2025 report is published.)
The REIA says the May rate cut fed into borrowing costs, with the average standard variable home loan rate easing to 8.3% and the average three-year fixed rate dipping to 5.9%.
Ms Pilkington says that while “we’re not out of the woods, these results highlight that the measures taken so far are having a positive impact”, especially for first-home buyers who are re-entering the property market in greater numbers.
Context
However, the increase should be put in context, with affordability hitting record lows late last year.
It also means most median-income households are still deep in “mortgage stress” territory.
While there are varying definitions in Australia, it’s generally accepted that a household is “stressed” when more than 30% of its pre-tax income is being spent on mortgage repayments.
At 47.7%, affordability nationally is still near record lows.
And with a median income household in New South Wales having to dedicate nearly 56.4% of its pre-tax income to mortgage costs (nearly double the level for the onset of “mortgage stress”), it’s clear millions of Australian homeowners are barely making ends meet.
Buyers
The REIA figures show first-home buyers surging back into the property market, with 30,047 new loan commitments recorded nationally in the three months to the end of June, up a significant 15.8% from the previous March quarter.
Every state and territory saw an increase, with Victoria leading at 10,188 commitments and the Northern Territory recording the smallest number at 258.
Loan sizes also rose, with the national average for first-home buyers climbing to $544,961.
Overall, the REIA says lending activity “reflected the more positive environment.”
Owner-occupiers took out 83,416 new loan commitments during the quarter, up 14.5% from the previous three months, while loan sizes increased 2.7% over the quarter to an average of $678,011, marking a 7.5% rise over the year.
Affordability improved across nearly all states and territories, with the exception of Western Australia, where it declined by 0.4%.
Tasmania recorded the most significant improvement, with affordability strengthening by 1.8%, while booming Queensland only saw a modest gain of 0.1%.
Renters
There was some limited good news for tenants, with rental affordability improving slightly for the third successive quarter.
The proportion of household income required to meet median national rent edged down to 24.4%, down 0.1%.
Although “rental stress” is also defined as a household spending more than 30% of its pre-tax income on housing, it’s worth noting that Commonwealth Rental Assistance payments have seen a significant boost over the last two years, helping to improve affordability for lower-income Australians who otherwise would have been in severe rental stress.
Improvements were recorded in New South Wales, Victoria, Queensland, Tasmania, and the ACT, though rental affordability worsened in South Australia, Western Australia, and the Northern Territory.
The outlook
The REIA is hopeful housing affordability will continue to improve.
“With another rate cut possible later this year and affordability now showing two consecutive quarters of improvement, the outlook for buyers is brighter than it has been in some time,” REIA President Leanne Pilkington says.
The REIA says its latest report “underscores cautious optimism for the housing market”, with improving affordability, easing borrowing costs, and renewed activity from first-home buyers “signalling positive momentum” as Australia moves into the second half of 2025.