Access to good quality, affordable housing is fundamental to wellbeing. It can help reduce poverty and enhance equality of opportunity, social inclusion and mobility (Gurran et al. 2021; Maclennan et al. 2019). Affordability is important for both Australians wanting to buy a home and for those renting. Many factors influence the supply, demand and cost of housing across the country, including Australia’s growing and ageing population and government policies (AIHW 2023; Burke et al. 2020; Gurran et al. 2021).

Housing affordability typically refers to the relationship between expenditure on housing (prices, mortgage payments or rents) and household incomes (Thomas and Hall 2016). Home ownership and housing tenure and Housing assistance are related to housing affordability.

The cost of housing

Purchasing a home

House prices have risen across Australia over the decade to 2023. The median transfer price for established houses in major cities increased substantially, with the median house transfer price in Sydney increasing from around $615,000 in the first quarter of 2013 to around $1.2 million at the start of 2023 (ABS 2023a). Median transfer house prices in Canberra ($975,000) were the second highest among the capital cities at the start of 2023, followed by Melbourne ($810,500) and Brisbane ($750,000), while Perth/Darwin ($575,000) were the lowest.

The median transfer price of attached dwellings (units, apartments etc.) in capital cities has also generally increased since 2013. Sydney prices increased from $520,000 at the start of 2013 to $750,000 at the start of 2023 (ABS 2023a). Canberra ($610,000) was the second most expensive price for units/apartments at the start of 2023, followed by Melbourne ($577,000) and Hobart ($560,000).

The price paid for housing in non-capital city areas has also increased, however, in general housing is less expensive than in capital city areas.

Throughout 2023, house prices have fallen compared to the same time period in 2022, as interest rates increased (CoreLogic 2023a; RBA 2023). Since 2021, housing costs as a share of income have risen considerably faster for households with a mortgage than for households that rent due to rises in interest rates (Phillips 2023).

Cost of rental accommodation

Around one-third (31%) of households in Australia were renting in 2019–20 (ABS 2022). The cost of private rental accommodation has increased substantially over recent years, especially after the COVID-19 pandemic.

Over the 12-months to June 2023, median advertised rents increased by 11.5% in capital city areas, with strong increases in Sydney, Melbourne and Perth (13% in each city) (CoreLogic 2023b). Canberra (-2.8%) was the only capital city area where advertised rents fell.

Advertised rents are important to understand potential barriers faced by people seeking a new rental lease, however, rental affordability is broader than advertised rents. That is, rents paid by existing and new tenants are important to understand housing affordability in context with other cost of living pressures.

Across Australia, rents paid increased by 2.5% in the June quarter 2023 and 6.7% annually; the largest annual rise since 2009 (ABS 2023b). Among the capital cities, Brisbane (8.9%), Perth (8.2%) and Sydney (7.3%) had the largest annual increases, while Hobart (2.9%) had the smallest increase.

How is housing affordability measured?

Measuring housing affordability is not straightforward. A household’s financial situation, the overall demand in the housing market and housing tenure type (whether a household is seeking to rent, is renting, is looking to buy or is a home owner with or without a mortgage) all influence individual housing affordability (Senate Standing Committees on Economics 2015). The simplest measure of housing affordability compares housing costs to gross household income.

Measures relating to housing affordability

Housing affordability can be expressed as the ratio of housing costs to gross household income (ABS 2022).

Housing costs are defined as the sum of rent payments, rate payments (water and general), and housing–related mortgage payments (ABS 2022).

Housing stress is typically described as lower-income households that spend more than 30% of gross income on housing costs (ABS 2022).

How much do we spend on housing?

In 2019–20, 10.5% of households spent more than 30% to 50% of gross income on housing costs and 5.7% of households spent 50% or more. These proportions have increased from 10.2% and 5.2% respectively since 2007–08 (Table 1).

Table 1: Housing costs as a proportion of gross household income, 2007–08, 2013–14 and 2019–20

Per cent of income spent on housing costs

2007–08
%

2013–14
%

2019–20
%

More than 50 (more likely to be in financial stress)

5.2

5.7

5.7

More than 30 to 50

10.2

12.0

10.5

More than 25 to 30

6.4

7.2

7.2

25 or less (less likely to be in financial stress)

78.2

75.1

76.6

Note: Excludes households with nil or negative income.

Source: ABS 2022.

The proportion of household income spent on housing costs in Table 1 does not consider that high-income households may choose to spend more than 30% of their household income on housing. Their higher income means they have sufficient income after housing costs to avoid financial stress (AHURI 2019; Rowley et al. 2015).

By contrast, low‑income households (lowest 40% of household income distribution) are more likely to lack the resources to deal with financial impacts arising from critical life events and/or housing market factors, often leading them to need additional housing assistance (AIHW 2023).

Housing stress among low-income households

Around 1.0 million low-income households were in financial housing stress in 2019–20, spending more than 30% of their income on housing (ABS 2022). More than half (58%) of low income households in the private rental market were in housing stress, compared with home owners with a mortgage (37%) and home owners without a mortgage (0.9%) (Table 2).

Table 2: Proportion of household income spent on housing costs (lower-income households only), by household characteristics, 2019–20
Low-income household characteristicHouseholds spending more than 30% of income on housing (%)

Owner without a mortgage

0.9

Owner with a mortgage

37.4

Private renter

58.0

Family households

 

Couple family with dependent children

30.3

One parent family with dependent children

41.8

Couple only family

15.4

Other one family households

16.2

Multiple family households

8.4*

Group households

51.3*

Lone person households

25.7

All households

25.1

*Estimate has a high margin of error and should be used with caution.

Notes

  1. Due to limitations of housing costs information, care should be taken when comparing costs of different tenure and landlord types.
  2. Housing costs as a proportion of gross household income is the sum of housing costs of a group divided by the summed gross weekly income of that group of households.
  3. Cells in this table have been randomly adjusted (by perturbation) to avoid the release of confidential data.

Source: ABS 2022.

Geographic variation of housing affordability

Housing costs and incomes varies across Australia, meaning housing affordability differs within and between states and territories and among housing tenure types (for example, home owners with a mortgage or renters).

Housing costs

Housing cost as a proportion of income varied across Australia and between landlord types. In 2019–20:

  • for all households housing costs as a proportion of income was highest in New South Wales (14.7%) and lowest in Western Australia (12.1%)
  • for homeowners with a mortgage, housing costs were highest in New South Wales (17.0%) and lowest in Western Australia (14.0%)
  • for private renters, housing costs were highest in New South Wales (22.2%) and lowest in Western Australia (17.4%) (Figure 1).

Figure 1: Housing costs as a proportion of gross household income, by housing tenure type and state and territories, 2021–22

This column graph shows the housing costs as a proportion of gross income for owners without a mortgage, owners with a mortgage, renters from state/territory housing authorities, renters private landlords and all tenure types.

This column graph shows that housing costs as a proportion of gross household income for all tenure types is 13.6% in Australia. For the states and territories, it is highest in New South Wales at 14.7%, followed by the Northern Territory (14.1%), Victoria (13.5%) and Queensland (13.4%). South Australia (12.6%), Tasmania (12.6%), the Australian Capital Territory (12.6%) and Western Australia (12.1%) are the lowest.

Notes

  1. # indicates that the proportion has a high margin of error. Caution should be taken when interpreting the data.
  2. Data have been randomly adjusted (by perturbation) to avoid the release of confidential data.

Source: ABS 2022.

Rental stress among low‑income households

For low‑income households in the private rental market, the proportion in rental stress (based on the 30/40 rule) varied between capital city and rest of state areas (ABS 2022):

  • In 2007–08, 38.5% of low‑income households in greater capital city areas were considered to be in rental stress increasing to 45.1% in 2019–20.
  • In 2007–08, 29.5% of low‑income households in rest of state areas were considered to be in rental stress increasing to 36.0% in 2019–20 (Figure 2).

Figure 2: Proportion of low‑income households in rental stress, by household location, 2007–08 to 2019–20

This column graph shows the proportion of low income households in greater capital cities, the balance of the states and territories and all households spending more than 30% of their gross income on housing cost for the years 2007–08, 2009–10, 2011–12, 2013–14, 2015–16, 2017–18 and 2019–20.

This column graph shows that the proportion of low income households in greater capital city areas spending more than 30% of their gross income on housing costs increased between 2007–08 and 2019–20 from 38.5% to 45.1%. The proportion of low income households in rest of state areas spending more than 30% of their gross income on housing costs also increased between 2007–08 and 2019–20 from 29.5% to 36.0%. The proportion of all low income households spending more than 30% of their gross income on housing costs increased between 2007–08 and 2019–20 from 35.0% to 42.0%.

Notes

  1. Low-income households in rental stress in this figure are defined as the 40% of households with equivalised disposable household income (excluding Commonwealth Rent Assistance) spending more than 30% of their gross income on housing costs. Values are calculated for greater capital city areas and rest of state, on a state‑by‑state basis.
  2. Households in Northern Territory SA1s defined as very remote were excluded, accounting for 22% of the population of the NT.

Source: ABS 2022.

Rental affordability index

The rental affordability index (see glossary) is a price index for housing rental markets across geographical areas of Australia, calculated using median incomes. A rental affordability index score of 80–100 represents unaffordable rent (that households spend 30 percent or more of their income on rent), a score between 100 and 120 represents moderately unaffordable rent, a score between 120 and 150 represents acceptable rent and a score greater than 150 represents affordable rents (SGS Economics and Planning 2022).

In general, rental affordability index scores are worse for the rest of the state or territory compared with metropolitan areas. As at June 2022:

  • Hobart was the least affordable metropolitan area in Australia.
  • Melbourne was the most affordable metropolitan area in Australia.
  • Affordability decreased compared with the previous year for all metropolitan areas.
  • Regional Queensland was the least affordable of the rest of states and territories.
  • Regional South Australia was the most affordable of the rest of state areas (Table 3).

Very low‑income households continue to face unaffordable rent in most capital cities (Baker et al. 2020).

Table 3: National rental affordability index summary by metropolitan areas and rest of states and territories, June 2022

Region

Rental affordability index

Proportion of household income
spent on rent

Relative unaffordability

Greater Sydney

120

25

Moderately unaffordable rents

Rest of New South Wales

106

28

Moderately unaffordable rents

Greater Melbourne

140

21

Acceptable rents

Rest of Victoria

115

26

Moderately unaffordable rents

Greater Brisbane

113

27

Moderately unaffordable rents

Rest of Queensland

104

29

Moderately unaffordable rents

Greater Perth

124

24

Acceptable rents

Rest of Western Australia

134

22

Acceptable rents

Greater Adelaide

119

25

Moderately unaffordable rents

Rest of South Australia

137

22

Acceptable rents

Greater Hobart

102

29

Unaffordable rents

Rest of Tasmania

108

28

Moderately unaffordable rents

Australian Capital Territory

121

25

Acceptable rents

Note: Data for the Northern Territory are not available.

Source: SGS Economics and Planning 2022.

Where do I go for more information?

See Housing assistance for more information on this topic. Also see: