The average Australian household needs to dedicate nearly twice as much of their income to paying their mortgage than they did five years ago, according to a new report.
The latest findings from property research firm Cotality come as the Albanese government comes under increasing pressure to find ways to accelerate the supply of new homes to ease price pressures.
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Servicing a new mortgage eats up 45% of a median household’s pre-tax income, up from 26% in September 2020, the analysis shows.
At the centre of the national housing affordability crisis – Sydney – the Cotality report showed the average household needs to dedicate 68% of their income to paying an average new mortgage for a house, and 39% of their before-tax pay for a mortgage on a unit.
Australian home values have climbed by about 50% since the start of the pandemic, Cotality’s head of research, Eliza Owen, said.
“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 said.
Soaring demand crashed into supply-side limitations, as builders struggled to cope with building costs and planning bottlenecks.
Over the past five years, the median home price climbed at two-and-a-half times the pace of an average Australian household’s income.
The median, pre-tax household income has lifted by a solid 20% to $104,390 since September 2020, but lagging far behind the 54% jump in the median dwelling value to $860,529.
That has left the national home value-to-income ratio at a record 8.2 in September, according to the report, a substantial worsening from 6.5 in March 2020.
Average weekly rents over the same period have jumped by a nearly identical 53%, showing the squeeze facing Australians trying to save for their first home while struggling with soaring rental costs.
While rental affordability has also deteriorated, it has not been as dramatic, at least in terms of the national average. The average portion of income required to pay rent has climbed to 33%, from 26% five years ago.
The report showed regional Queensland had the most unaffordable rents, with households on average incomes outside Brisbane having to dedicate 39% of their pre-tax pay to lease a home.
Housing affordability had been gradually improving in the decade leading up to the pandemic, but the exodus from the cities during the early years of the health crisis put a rocket under property prices outside the capitals, the report shows.
Over the past five years, the price of a home in the regions surged by 72%, against the 48% rise in the median home price across the capital cities.
Action on affordable housing is among the three most important issues for 49% of voters, according to Essential polling, and that share jumps to 56% for 18-to-34-year-olds.
That places housing affordability as the second top concern overall, behind cost of living, which 79% of voters put in their top three issues demanding government action (34% say Medicare).
While populist politicians have attempted to link the housing crisis with immigration, the report notes that home values surged by 25% in 2021 – the fastest annual pace since the 1980s – even as net immigration plunged to just 9,000 people in that year.
Rents in 2021 also jumped by nearly 10%, after a decade of rising by just over 2% a year.
Rapid property price gains have helped stoke a growing speculative frenzy, with lending to investors jumping by nearly 19% in the year to September, according to the Australian Bureau of Statistics.
