Housing affordability is at its lowest level in 20 years, with interest rate increases putting homebuyers under extreme pressure, according to a new report.

According to the Real Estate Institute of Australia (REIA) Housing Affordability Report (HAR), housing affordability is now at crisis levels, with the proportion of income required to meet the average loan repayment increasing to 47.7 per cent – an increase of 2.1 percentage points.

Housing affordability declined in all states and territories in the December quarter, except the Northern Territory where it remained stable. 

Tasmania had the smallest drop in housing affordability, at 0.5 percentage points, while Queensland had the largest decline at 2.8 percentage points. 

Housing affordability in NSW Victoria, South Australia, Tasmania and the ACT is at its lowest point in 20 years.

REIA President, Leanne Pilkington, said that with the cash rate sitting at 4.35 per cent in December 2023, it came at no surprise that housing affordability had reached its worst level since the REIA started publishing the HAR.

“Nationally, housing affordability has declined a substantial 2.7 percentage points over the quarter, and the average household is now spending 47.7 per cent of their income on mortgage repayments,” Ms Pilkington said.

She said housing affordability was at critical levels across NSW, Victoria, South Australia, Tasmania and the ACT, in particular.

“Queensland emerged as the biggest loser in the affordability stakes, declining in housing affordability by 2.8 per cent in the quarter,” she said.

“Only with rate rise relief will we see changes to this outlook.”

Ms Pilkington said rental affordability improved in NSW and remained stable in the ACT.

“However, nationally, the proportion of income required to meet median rent increased by 0.3 percentage points to 23.9 per cent.

“This translates to a decline in rental affordability in most states: Victoria, Queensland, South Australia, Western Australia, Tasmania and the Northern Territory.”

Ms Pilkington said only a dramatic increase in rental supply would change this outlook.

“Perhaps responding to critical rental conditions, this quarter showed positive results for more active entry level buyers,” she said.

“The number of first home buyers increased to 31,445, an increase of 16.8 per cent over the quarter and an increase of 12.8 per cent compared to the December quarter 2022.”

Ms Pilkington said all jurisdictions reported increases in first-home buyer volumes, although it varied considerably.

“Overall, the average loan size to first-home buyers increased to $514,664,” she said.

“This was an increase of 2.3 per cent over the quarter and an increase of 5.5 per cent over the past 12 months.”

According to the report, the average loan size to first-home buyers increased in all states and territories except Tasmania where there was a 6.9 per cent decrease. 

South Australia had the largest increase in average first home buyer loans (6.6 per cent) and NSW and the Northern Territory had the smallest increase (0.3 per cent).

The total number of owner-occupied dwelling loans increased to 83,620, an increase of 11.7 per cent over the December quarter and an increase of 2.8 per cent over the past year. 

The total number of loans for owner occupied dwellings increased in all states and territories over the December quarter. Increases ranged from 9.7 per cent in Queensland to 25.2 per cent in the Northern Territory. 

Over the December quarter, the average loan size increased to $614,029, an increase of 3.7 per cent over the December quarter and an increase of 2.3 per cent over the 12 months.