Australian families are facing an unprecedented housing affordability crisis as new research reveals mortgage payments now consume nearly twice the proportion of household income compared to just five years ago.
The Staggering Numbers Behind Australia's Housing Crisis
According to property research firm Cotality, servicing a new mortgage now devours 45% of a median household's pre-tax income, a dramatic increase from the 26% recorded in September 2020. This alarming statistic highlights the growing financial pressure facing Australian homeowners and aspiring property buyers.
The situation becomes even more dire in Sydney, where the housing affordability crisis reaches its peak. The Cotality report indicates that Sydney households must dedicate a staggering 68% of their income to cover an average new mortgage for a house, while unit mortgages require 39% of pre-tax earnings.
What's Driving The Affordability Crunch?
Eliza Owen, head of research at Cotality, attributes this dramatic shift to substantial property value growth. Australian home values have climbed by approximately 50% since the start of the pandemic in 2020.
"This surge was fuelled by pandemic-era monetary stimulus and record-low interest rates that supercharged borrowing capacity and demand, even as housing supply lagged well behind household formation," Owen explained.
The data reveals that over the past five years, the median home price has increased at two-and-a-half times the pace of average Australian household incomes. While median pre-tax household income has grown by a respectable 20% to $104,390 since September 2020, it has been completely overshadowed by the 54% jump in median dwelling values, which now stand at $860,529.
Rental Market Parallels and Regional Pressures
The affordability crisis extends beyond home ownership, with rental markets experiencing similar pressures. Average weekly rents have increased by 53% over the same period, creating a double squeeze for Australians attempting to save for their first home while managing soaring rental costs.
While rental affordability has also deteriorated nationwide, the situation varies significantly across regions. Regional Queensland has emerged as the most unaffordable rental market, with households outside Brisbane needing to allocate 39% of their pre-tax income to lease a property.
The report highlights that housing affordability had been gradually improving during the decade preceding the pandemic. However, the regional exodus during health restrictions dramatically altered this trend, with regional home prices surging by 72% over five years, compared to a 48% rise across capital cities.
Public concern about housing affordability has reached critical levels, with Essential polling indicating that action on affordable housing ranks among the top three issues for 49% of voters. This concern escalates to 56% among 18 to 34-year-olds, positioning housing affordability as the second highest priority overall, trailing only behind general cost of living pressures.
The analysis also challenges simplistic explanations linking the housing crisis solely to immigration. Notably, home values surged by 25% in 2021 - the fastest annual pace since the 1980s - despite net immigration plunging to just 9,000 people during that year.
This rapid property price growth has stimulated increasing investor activity, with lending to investors jumping by nearly 19% in the year to September, according to Australian Bureau of Statistics data.
