The Real Estate Institute of Australia (REIA) has released its June quarter housing affordability report for first home buyers and renters, which shows that affordability has plummeted for both cohorts.
At the national level, the proportion of income required to meet average loan repayments rose to 38.4% in the June quarter, an increase of 4.7% over the past year. This was due to a combination of rising mortgage rates and higher average loans, with loan repayments rising $621 per month over the year.
It is important to note that this affordability data is only current to June, and therefore does not capture the three consecutive 0.5% rate hikes in July, August and September. The cumulative 2.25% of interest rate hikes over the past five months has already lifted average mortgage repayments by 30% versus their level in April immediately prior to the first rate hike:
For a household with a $500,000 mortgage, this represents a monthly increase in repayments of $671, whereas a household with a $1,000,000 mortgage will pay an extra $1,341 a month.
The worst is yet to come, too, with last week’s RBA monetary policy statement noting that “the Board expects to increase interest rates further over the months ahead”.
The REIA also notes that rental affordability deteriorated sharply over the June quarter, with the proportion of income required to meet median rent increasing to 22.9%, up 1.2 percentage points over the past year.
Again, the situation has likely worsened given rental growth accelerated to a record high 10.0% nationally in the year to August, according to CoreLogic:
Regardless, the combination of soaring mortgage rates and rents has smashed affordability. And the situation will only deteriorate as the Albanese Government opens the immigration floodgates.
