Housing affordability hits record lows

The 2020s have seen housing affordability drop to new lows, with three of the four key national indicators (the price-to-income ratio, years required to save a deposit, and the share of income needed to rent) having all hit record highs in 2025, according to the Cotality Housing Affordability Report.

Both buying and renting have reached unsustainable levels for many Australians, the property analytics company stated, revealing that the median house value is now 8.9 times higher than the median income (up from 6.6 times in 2020).

While median income estimates increased by 20 per cent over the five years to September 2025, they were vastly outpaced by property values and rents, which rose by approximately 53 per cent.

Despite recent rate dips, the cost of servicing a new loan is also “stubbornly high”, requiring 45 per cent of median household income.

The data found that, nationally, it would take 11 years, on average, to save up to the standard 20 per cent deposit for a dwelling.

The jump in dwelling value has been softer when comparing units to houses – units climbed from six times annual income to 6.7 times over the five-year window.

Although deposit-saving times and dwelling value-to-income ratios remain below their 2022 peaks, Cotality data indicates they could climb to new highs in the December quarter amid strong market conditions.

The median dwelling value-to-income ratio for regional markets now stands at 8.1, while in capital cities it is 8.2, erasing what was once a more affordable alternative for those looking to buy outside metropolitan areas.

The data found that Sydney remained the most expensive city in the country, with the value of a dwelling sitting 10 times higher than the average income, leaving buyers in the NSW capital saving for 13.3 years to build up a 20 per cent deposit.

NSW regional markets saw a similar trend, leading the country in the least affordable properties, with buyers taking 12.1 years to save a 20 per cent deposit.

The report showed that Adelaide now ranks second as the nation’s least affordable city, with average home prices rising by 77.2 per cent over the previous five years, compared to a 20.1 per cent growth in household income.

Following the price increase, Cotality showed that Adelaide buyers will need 12.3 years to achieve a 20 per cent deposit.

Meanwhile, in Brisbane, house prices have risen to 9.7 times the average income, ranking the city as the nation’s third-least affordable capital city to purchase a home.

This was followed by Perth, Hobart, Melbourne, and Canberra, which all required between eight and 10.5 years to save for a 20 per cent deposit.

In contrast, data found that Darwin was the most affordable capital to buy a home, with residents needing to save for only 5.7 years to afford a 20 per cent deposit.

The report said that poor capital growth over the past decade had been essential to maintaining affordable dwellings in Darwin and the Northern Territory, with the amount required to service a mortgage below 30 per cent of the average income.

However, Cotality forecast that Darwin would likely begin to catch up, with property values experiencing rapid growth, surging by 13.1 per cent year to date.

Cotality head of research, Eliza Owen, said that a combination of factors had led to house prices skyrocketing and deteriorating affordability.

“Australian homes have climbed roughly 47.3 per cent since March 2020, an extraordinary rise that added about $280,000 to the median dwelling value,” 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.”

She noted that supply-side constraints also compounded demand pressures, as construction issues, rising material costs, and planning bottlenecks restricted new deliveries.

“In short, the past five years combined extraordinary drivers with supply constraints, creating an extraordinary boom in both home values and rents,” she said.

The Cotality head of research said that the report’s findings had made it clear that sustainable housing affordability cannot be achieved by relying on short-term market corrections.

“While temporary declines in property values may offer a brief relief, they are not a lasting solution,” Owen concluded.

“Even if growth slows, the underlying gap between housing values and incomes will persist unless meaningful reform is pursued.”

PropTrack shows slight affordability improvement

Similarly, REA Group’s data business, PropTrack, today (28 November) released its annual Housing Affordability Report, which showed that housing affordability improved slightly over 2025, but remained close to record-low levels.

The report, based on the PropTrack Housing Affordability Index, measures the share of homes across the income distribution that households can afford. PropTrack found that higher incomes and lower mortgage rates, following the Reserve Bank’s interest rate cuts in February and May, eased borrowing costs and boosted borrowing capacity, yet mortgage serviceability and saving a deposit remain key hurdles for buyers.

The report found that a median-income household – earning about $118,000 a year – could afford just 15 per cent of homes sold in the 2025 financial year, up from 11 per cent a year prior.

Low-income households at the 30th percentile could afford only 3 per cent of homes sold.

PropTrack calculated that an average-income household saving 20 per cent of income would need 5.8 years to reach a 20 per cent deposit, notably shorter than Cotality’s estimate of 11 years.

Borrowing capacity for households increased by an average of 9.8 per cent, enough to offset the rise in home prices between 2023–24 and 2024–25, and mortgage repayments now account for about a third of average household income, slightly down from the June 2024 peak of 34.3 per cent.

For higher-income households, affordability improved marginally as home prices at the top end of the market did not rise as quickly as more affordable homes.

In contrast, more affordable parts of the market – where lower and middle-income households are buying – saw faster price growth, meaning affordability worsened for these buyers. For the first time since 2021, South Australia surpassed NSW to hold the highest deposit burden in the country.

Overall, NSW and South Australian households face the most challenging affordability, with median-income households able to afford only 11 per cent and 10 per cent of homes, respectively, while Western Australia and Victoria remain comparatively more affordable.

REA Group senior economist Angus Moore commented: “The PropTrack Housing Affordability Index shows that nationally, conditions improved modestly in 2025. Higher income growth, coupled with lower interest rates following the RBA’s cuts in February and May, eased borrowing costs and boosted borrowing capacity.”

However, he added: “But even so, affordability remains near record lows, with conditions particularly challenging in New South Wales and South Australia. Since the start of 2025, home prices have risen 7 per cent and are growing consistently around the country.

“While there’s still a chance of another rate cut next year, we aren’t likely to see more than that. The three cuts we’ve already seen in 2025 will continue to support home price growth, albeit at a slower pace than in recent years given the very challenging level of housing affordability. As a result, affordability will remain challenged in the year ahead.”

Affordability has been a major focus for the Albanese government, as a lack of supply and strong demand stoke prices. As supply remains tight, buyers priced out of stand-alone homes are increasingly turning to town houses and units as the affordability gap widens, reshaping demand and forcing many to compromise on property type, size, or location just to stay in the market.

[Related: Regional property price growth at 3.5-year high]