iscover 
According to REA Group’s Housing Affordability Index, which assesses the proportion of homes that households across the income distribution can afford, a median-income household earning around $125,000 could afford just 12 per cent of homes sold across FY26.
That was the lowest level recorded, falling below the previous low of 14 per cent recorded in FY08.
Affordability declined across the board, with higher home prices and rising mortgage rates reducing borrowing capacity throughout the year.
The report found home prices increased by just over 5 per cent between FY25 and FY26, while mortgage rates rose from 5.8 per cent to 6.3 per cent following three RBA rate hikes.
While household incomes increased by an estimated 4.5 per cent over the year, this was not enough to offset the increase in prices and borrowing costs.
Affordability has become particularly challenging for lower-income households, with a household at the 30th income percentile, earning around $76,000, able to afford just 2 per cent of homes sold.
Households in the lower quartile could afford just 1 per cent of homes, down from 9 per cent in FY20.
REA senior economist Angus Moore said: “The Housing Affordability Index shows that nationally, housing affordability remains challenged for most Australians, despite the slight reprieve offered last year.
“The three RBA interest rate hikes made in February, March and May increased mortgage rates and further constrained household borrowing capacity amid an already difficult cost-of-living environment.
“This combination pushed affordability to a record low, as a typical-income household in FY26 could afford just 12 per cent of homes.”
Affordability deteriorates across the board
South Australia has become the least affordable state in Australia, overtaking NSW for the first time since FY11.
A median-income household in South Australia, earning around $103,000, could afford just 7 per cent of homes sold in the past year, while the median home value in Adelaide reached $940,000.
Mortgage repayments have also pushed to new highs, consuming 43.9 per cent of household income.
NSW follows South Australia, with a typical-income household earning $126,000, but only affording 9 per cent of housing sold in FY26.
Mortgage repayments in the state reached 39.2 per cent of income in FY26, while the time required to save a 20 per cent deposit edged down from 6.8 years to 6.7 years.
Queensland also hit new lows for affordability, with a typical-income household earning just under $124,000 able to afford 9 per cent of homes, down from 15 per cent in FY25.
The state also recorded the highest mortgage repayment burden on record, with repayments on a median-priced home consuming 39.7 per cent of average household income.
Queensland households now need an average of 6.7 years to save a 20 per cent deposit, also a record high.
Victoria has swung in the opposite direction, becoming the most affordable state in the country for the first time since records began in FY95.
This does not mean that affordability isn’t a challenge, with a median-income household earning around $127,000 able to afford just 16 per cent of homes, down from 19 per cent a year earlier.
Western Australia, meanwhile, has lost its position as the country’s most affordable state after rapid price growth.
The share of homes affordable to a typical-income household fell from 19 per cent to 10 per cent over the year, although Western Australia continues to have the lowest mortgage repayment burden at 30.9 per cent of income.
First home buyers turn to low-deposit loans
The deterioration in affordability has come despite more first home buyers (FHB) accessing the market with smaller deposits.
Around 120,000 first home buyer households took out a home loan during FY26, according to the report.
Within that, the proportion of FHB loans made through the government’s 5 per cent Deposit Scheme has surged from around 25 per cent before the expansion to around 50 per cent afterwards.
The expansion increased price caps, removed income requirements, and removed place quotas, allowing more first home buyers to access the scheme.
Nonetheless, while schemes such as the 5 per cent Deposit Scheme help buyers move sooner, they don’t necessarily improve affordability.
Rather, the report found that schemes push demand in the lower end of the market, contributing to stronger price growth.
The most affordable properties have recorded the strongest price growth since March 2020, with prices at the affordable end outpacing middle and higher-priced homes since mid-2022.
Broker Daily has previously reported on the effects of the scheme on the lower end of the market, with brokers flagging far-reaching effects.
Mortgage repayments hit highest level since 1989
The pressure on borrowers becomes even clearer when mortgage repayments are measured against household incomes.
Mortgage repayments rose to 35.5 per cent of average household income in FY26, the highest level recorded since 1989.
The figure is also above the 33.3 per cent recorded during the global financial crisis.
In 1989, mortgage rates were sitting at 15.5 per cent, compared with 6.3 per cent in June 2026.
The difference is that today’s higher repayment burden is being driven by a combination of elevated home prices and mortgage rates, rather than interest rates alone.
The deposit hurdle has also continued to grow.
An average-income household saving 20 per cent of its income would now need around six years to build a 20 per cent deposit on a median-priced home, up from 5.8 years in FY25.
South Australia has the highest deposit burden, at 7.4 years, followed by Queensland at 6.7 years.
Moore said: “Looking ahead, affordability may improve marginally if home prices continue to soften, but this is unlikely to be a turning point for many buyers.
“Without a meaningful increase in housing supply, affordability will remain a significant challenge, particularly for lower income households.”
[Related: SMEs defy economic headwinds, but growth strategy shifts]
Want to see more stories from trusted news sources?Make Broker Daily a preferred news source on Google.
