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 2019–20Per 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 characteristic | Households 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
- Due to limitations of housing costs information, care should be taken when comparing costs of different tenure and landlord types.
- 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.
- 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).
