The recent report indicates that Australian families now have to allocate almost double the portion of their income to mortgage payments compared to five years ago.
Property analysis firm Cotality has released data amidst growing calls for the Albanese government to boost the availability of new homes to mitigate the impact of rising prices.
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Currently, a new mortgage consumes 45% of the median pre-tax household income, a significant increase from 26% in September 2020.
In Sydney, which is at the heart of Australia’s housing affordability crisis, families must spend 68% of their income on mortgage payments for a new house and 39% on a unit, according to the Cotality report.
Since the onset of the pandemic, home values in Australia have risen by about 50%, states Eliza Owen, Cotality’s head of research. She attributes this sharp increase to low interest rates and economic policies during the pandemic which boosted buying capacity and demand, outpacing the growth in housing supply.
This high demand coupled with constraints on the supply side, such as rising construction costs and planning delays, has exacerbated the situation.
Over the last five years, median home prices surged by more than double the rate of the average Australian household income growth. While the median household income before taxes increased by 20% to $104,390 since September 2020, median home values soared by 54% to $860,529.
As of September, the national home price to income ratio reached a record high of 8.2, a stark rise from 6.5 in March 2020.
Rental costs have also seen a similar sharp increase of 53%, putting additional financial pressure on Australians who are saving to buy their first home.
While the national average for rental affordability has worsened, it’s not as severe as the situation with home buying. The percentage of income needed for rent has increased to 33% from 26% over the past five years.
Particularly in regional Queensland, rent affordability is notably poor, with households needing to spend 39% of their pre-tax income on average to rent a home.
Before the pandemic, there was a slow but steady improvement in housing affordability. However, the trend of moving away from city centers during the early stages of the pandemic significantly drove up property prices in less urban areas.
In the regions, home prices jumped by 72% over the past five years, compared to a 48% increase in the capitals.
Affordable housing remains a top priority for many Australians, with 49% of voters considering it one of the three most crucial issues, according to Essential polling. This concern is even more pronounced among younger adults aged 18 to 34, where 56% rate it as a key issue.
Housing affordability ranks as the second most critical concern after the cost of living, which 79% of voters list among their top three issues requiring government intervention.
Despite some politicians attributing the housing crisis to immigration, the report highlights that home values surged by 25% in 2021, the highest annual increase since the 1980s, despite a sharp drop in net immigration to just 9,000 people.
Rental rates in 2021 also saw a near 10% increase, a significant jump from the average annual increase of just over 2% in the preceding decade.
The rapid rise in property prices has fueled a speculative boom, with investor lending increasing by nearly 19% in the year to September, as reported by the Australian Bureau of Statistics.
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