By Kat Wong in Canberra

Australian families are spending nearly half of their incomes paying their home loan as housing affordability drops to its worst point in almost three decades.

The outlook doesn’t look any better for renters, with tenants now forking over an even higher proportion of their pay for rent.

Housing affordability has reached a historic low, and the Real Estate Institute of Australia’s 2024 September quarter report has recorded the “most challenging conditions” since it began monitoring the landscape in 1996.

Households across the nation spent 48.6 per cent of their incomes on loan repayments during the September quarter, a 0.4 percentage point increase from the previous three months and 2.9 percentage points over the year.

Though there were some improvements in Tasmania and the Northern Territory, housing became less affordable in every other state.

The weighted average capital city median house price grew to $1,050,370 after a 0.2 per cent increase during the September quarter and 6.2 per cent growth over the past 12 months.

In just five years, housing affordability has declined 16.8 percentage points compared to 12.2 percentage points across the past two decades.

“Rising mortgages sizes coupled with stagnant variable interest rates continue to push affordability further out of reach,” institute president Leanne Pilkington said.

Renters faced a similar story of woe, with the proportion of income required to meet median rents increasing by 0.3 percentage points over the quarter, meaning tenants now spend about a quarter of their pay on rent.

Rental affordability declined in every state and territory except Victoria and Queensland, decreasing Australia-wide by 3.0 percentage points over the past five years and 3.6 percentage points over the past 20 years.

NSW remains the most unforgiving state or territory to live as a renter or mortgage holder.

Families with an average loan repayment are now spending 58.1 per cent of their income on each instalment, while tenants spend 28.7 per cent of their pay.

Australians are generally considered to be in rental stress when they pay more than 30 per cent of their income in rent.

However, there is hope in the near future.

The Reserve Bank is expected to start cutting the cash rate in the first half of 2024, and there are signs house prices in some areas are easing while vacancy rates – which can determine rent prices – are improving.

Ms Pilkington says the government must do more to improve housing supply and tackle affordability issues.

“Without meaningful action, homeownership will remain an increasingly elusive goal for many Australians,” she said.

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