Grim reality of the great Aussie dream: Experts reveal what you can REALLY afford to buy in spiralling market as housing crisis hits record levels

Housing affordability in Australia has deteriorated to its ‘lowest level ever’, due to high mortgage rates and rising house prices.

The grim finding in the latest PropTrack Housing Affordability Report means that the average household making an average income (about $112,000) can afford just 14 percent of the homes sold in the country.

This is the smallest percentage of homes since the first measurements in 1995. In just three years, the percentage fell from 43 percent.

New South Wales, Tasmania and Victoria were named as the states with the worst housing affordability.

The report found that a household on an average income could afford just 10 percent of the homes sold in New South Wales, and mortgage costs in the area were higher than anywhere else in Australia.

The PropTrack report found that South Australia has seen the biggest decline in affordability over the past year, with a middle-income household able to afford just 16 per cent of homes sold in the past financial year.

That percentage is down from almost half (about 49 percent) in 2020-2021.

The PropTrack report also found that mortgage costs remain the same as they were in 2008 and are only slightly lower than their historic peaks of 1989-1990.

“A median-income household would have to spend a third of its income on mortgage payments to afford a median-priced home,” said Paul Ryan, senior economist at PropTrack.

‘Households across all income groups were able to afford the fewest homes last year, down significantly from just a year ago.

‘During this period, income growth has been insufficient to offset rapidly rising house prices and mortgage rates, meaning that the average Australian household can now afford just 14 per cent of all homes sold in the country.’

In July, research led by property experts Mustapha Bangura and Professor Chyi Lin Lee found that the average full-time income was no longer high enough to enter the housing market anywhere in Sydney.

The couple couldn’t find affordable housing anywhere in Sydney, based on the median weekly income for part-time workers in NSW in 2021 of $600 – and the median weekly income for full-time workers of $1,500.

The research found that proximity to the city was a factor, with the closer the property is to Sydney’s CBD, the harder it becomes for potential home buyers.

High mortgage rates and rising house prices have made most homes unaffordable for the average Australian

Commenting on the PropTrack report, Mr Ryan said first home buyers and renters are facing a huge budget squeeze just to buy a property on the market.

“Mortgage rates have reached their highest level since 2011 and this has had a dramatic impact on housing affordability. In just two years, borrowing capacity for new borrowers has decreased by as much as 30 percent and repayment terms for existing borrowers have increased by as much as 50 percent,” he said.

Mr Ryan noted that housing affordability is expected to decline as interest rates fall, which could happen in the next six months.

He said meaningful improvement requires changes on multiple fronts.