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Australia recorded its largest quarterly improvement in housing affordability since 2016, according to the Real Estate Institute of Australia’s (REIA) Housing Affordability Report for the March 2025 quarter.
Housing affordability improved nationally for the first time in 12 months, with the proportion of median family income required to meet average home loan repayments dropping by two percentage points to 48%. However, this figure remains one percentage point higher than in the same period last year.
All states and territories recorded improvements in housing affordability except the Northern Territory, which saw a 0.5-percentage-point decline. The strongest gains were reported in New South Wales and the Australian Capital Territory, both improving by three percentage points. Tasmania showed the smallest improvement, at 0.1 percentage points.
REIA attributed the national improvement to a 1.1% quarterly rise in median family income to $2,560 per week and a 2.9% decline in average monthly loan repayments to $5,323. This coincided with the Reserve Bank of Australia’s February decision to cut the cash rate to 4.1%. The average standard variable interest rate fell 0.3 percentage points to 8.5%, while the average three-year fixed rate declined by 0.1 percentage points to 6.0%.
Rental affordability also improved modestly over the quarter. The proportion of income required to meet median rents decreased 0.2 percentage points to 24.5%. Improvement was reported in New South Wales, Victoria, Western Australia and the ACT, while conditions remained unchanged in South Australia and deteriorated in Queensland, Tasmania, and the Northern Territory.
First-home buyer activity followed seasonal trends, with new loan commitments falling 15.9% from the previous quarter to 26,091. However, compared to the same period last year, activity increased by 1.0%. First home buyers accounted for 35.7% of all owner-occupier dwelling loan commitments. The average loan size for this group slightly declined to $542,356, down 0.1% from the December quarter, but up 4.6% annually.
Overall, total owner-occupier loan commitments fell 16.0% quarter-on-quarter to 72,991, in line with expected seasonal patterns. Year-on-year, lending rose 4.1%. The national average loan size declined 0.9% to $659,921 but reflected an 8.3% increase compared to the same period in 2024.
Despite recent gains, long-term trends show affordability has deteriorated over time. Nationally, the proportion of income required to meet average loan repayments has risen by 15.8 percentage points over the past five years. Rental affordability has declined by 2.7 percentage points over the same period.
