Housing affordability in Australia has seen its sharpest improvement in nine years, according to the Real Estate Institute of Australia (REIA).
The REIA says data in its latest quarterly Housing Affordability Report shows falling loan repayments and modest income growth have boosted affordability for both home buyers and renters.
The details
Every three months, the Real Estate Institute of Australia releases a report on housing affordability.
The previous study, which took place over the three months to the end of December 2024, reported that affordability in Australia has reached its lowest point since the industry group began monitoring it.
REIA’s latest Housing Affordability Report says that Australia’s housing market saw a shift in momentum over the March quarter of 2025, with affordability showing its first signs of improvement in over a year.
REIA says the proportion of national median family income needed to meet average loan repayments fell to 48.0%, improving by 2.0% over the quarter.
The Institute's President, Leanne Pilkington, says the result marks “the greatest quarterly improvement in housing affordability since the March quarter of 2016.”
“The report attributes this improvement to a combination of rising incomes and easing (mortgage) repayment levels,” she says.
REIA says the national median weekly family income increased by 1.1% over the March quarter of 2025 and 4.0% year-on-year, reaching $2,561.
At the same time, the Institute says average monthly loan repayments dropped by 2.9% to $5,323 – a result of both reduced interest rates and smaller loan amounts.
In February 2025, the Reserve Bank of Australia began lowering the cash rate from a 13-year high, cutting rates by 0.25% to 4.10%.
Nearly all banks and financial lenders passed this rate cut on in full on their variable retail mortgage products.
“All states and territories saw housing affordability gains, with the exception of the Northern Territory, where affordability slipped by 0.5%,” Ms Pilkington says.
“Tasmania recorded the smallest improvement (0.1%), while New South Wales and the Australian Capital Territory led the way with a 3.0 % gain.”
While there has been some improvement, it’s worth noting that this is coming from a historic low point, especially for buyers.
Lower-income households are generally said to be in “housing stress” when they spend more than 30% of their income on housing.
On that measure, no state or territory in Australia currently has affordable housing, with median households in New South Wales having to spend an astonishing 56.8% of their income to be able to afford a median-priced home.
The ACT is the most affordable place in the country to both own a median home or rent one, at 33.4% of household income for owners and 18.9% for renters, although this relative affordability is due to higher income levels in Canberra rather than due to cheaper median-priced properties or rentals.
Despite this challenging picture, REIA President Leanne Pilkington says first home buyers remain active in the property market, although the number of buyers has dipped in line with seasonal expectations.
“There were 26,091 new loan commitments during the March quarter, 15.9% lower than the previous quarter but 1.0% higher than a year ago.
“These buyers made up 35.7% of all owner-occupier dwelling loan commitments, holding steady over the quarter but down 1.1% annually.”
Renters
REIA says rental affordability also increased for a second straight quarter.
It says the national proportion of household income required to pay the median national rent decreased by 0.2% to 24.5%.
New South Wales and Western Australia recorded the greatest improvements in rental affordability, while conditions actually deteriorated in Queensland, Tasmania, and the Northern Territory.
Nevertheless, Ms Pilkington says New South Wales continues to be the least affordable state or territory to rent a home.
In the end..
While the improvements for buyers and renters in terms of affordability offer some relief, Ms Pilkington says it’s “too early to declare a full-scale recovery in affordability.”
The REIA President says sustained lower interest rates and wage growth will be the keys to maintaining this positive momentum.
“With economic conditions easing and cost pressures beginning to stabilise, both aspiring homeowners and renters may find 2025 a more navigable path forward – for now”, she says.