Gloom to boom: Housing affordability issues are on the decline
Hope Coumbe, Finance Editor
First published 06 June 2025, 12:00 PM
The strained housing market in Australia has continued to be of major financial and political concern since the end of the COVID-19 pandemic. However, affordability improved for the first time in 12 months after a rocky 2024.
Outside of the Northern Territory, all states in Australia saw an improvement in affordability over the March quarter, according to the Real Estate Institute of Australia's (REIA) 2025 Housing Affordability Report.
“We can attribute this improvement to two factors: rising median family incomes and reduced loan amounts,” REIA president Leanne Pilkinton said.
The report shows the average loan repayment now amounts to 48% of a median family income, next to a median family income of $2561 per week.
The loan repayment statistic is a two-percentage point improvement compared to the same period in 2024.
“There are signs that both housing and rental affordability will improve further over 2025,” Ms Pilkington said.
The national median price of a home in Australia is currently sitting at $809,000, according to PropTrack, with Sydney, Brisbane and Canberra sharing the podium for the least affordable capital cities.
The uptick in the affordability figures came immediately on the back of the much-needed lifeline handed to buyers and mortgage holders by the Reserve Bank of Australia (RBA) back in February –the first interest cut in more than four years.
'Is Melbourne our most affordable major city': youtube.com/mortgagechoice
“There are market expectations of a further drop in interest rates after the RBA cut the cash rate for the second time in May,” Ms Pilkington said.
While the 25-basis point cut last month will boost affordability through increasing borrowing power, it does not address the most pressing concern for housing in Australia – availability.
Supply of housing continues to fall excessively below demand, with the ambitious Housing Accord Accord for 1.2 million new homes significantly behind target.
The Labor federal government was re-elected with an increased seat majority and more authority last month, on the promise that fixing the country’s housing crisis was top of its priority list.
First-home buyers will be able to enter the crowded housing market with a deposit as low as 5% under Labor’s plans, while a further 100,000 new homes have been announced – also aimed at first-home buyers – in a bid to soften affordability constraints.
