Housing affordability in Australia improved for the second consecutive quarter, according to the Real Estate Institute of Australia’s (REIA) Housing Affordability Report for June.
REIA president Leanne Pilkington (pictured left) said the latest results represent a much-needed shift after affordability hit record lows late last year.
“It’s encouraging to see housing affordability improving for Australian families, particularly after the challenges we reported just six months ago,” Pilkington said in a media release.
She added that while the market is not yet out of the woods, the latest figures show progress, particularly for first-home buyers.
“These results highlight that the measures taken so far are having a positive impact, especially for first home buyers who are re-entering the market in greater numbers,” Pilkington said.
The report found that the proportion of median family income required to meet average loan repayments fell to 47.7% in the June quarter, improving 0.3 percentage points from March and 0.5 points compared to a year ago.
Affordability strengthened across most states and territories, led by Tasmania (+1.8pp), while Queensland recorded a modest improvement of 0.1pp. Western Australia was the exception, with affordability declining by 0.4pp.
Rental affordability also improved nationally for the third straight quarter, with the proportion of income needed to meet median rent edging down to 24.4%. Gains were recorded in NSW, Victoria, Queensland, Tasmania and the ACT, while affordability worsened in SA, WA and the Northern Territory.
The Reserve Bank’s May cash rate cut of 0.25pp to 3.85% supported the trend, feeding into lower borrowing costs. The average standard variable rate fell to 8.3%, while the average three-year fixed rate dipped to 5.9%.
First-home buyers were a key driver of improvement. Nationally, there were 30,047 new loan commitments in the June quarter, up 15.8% from March. Every state and territory saw increases, with Victoria leading the way (10,188 commitments).
Loan sizes also rose, with the national average climbing to $544,961.
Overall lending activity reflected the brighter outlook, with owner-occupiers making 83,416 new commitments, up 14.5% from the previous quarter. The average loan size increased 2.7% over the quarter to $678,011, a 7.5% rise year-on-year.
Looking ahead, Pilkington said further relief may be possible.
“With another rate cut possible later this year and affordability now showing two consecutive quarters of improvement, the outlook for buyers is brighter than it has been in some time,” she said.
In contrast to the national trend, WA recorded a slight decline in housing affordability. The proportion of family income needed to meet loan repayments rose 0.4pp in the June quarter to 41.2%.
REIWA president Suzanne Brown (pictured right) said strong price growth offset the impact of earlier rate cuts.
“As prices rise, people have to borrow more to buy a home and a greater proportion of family income is required to make mortgage repayments,” Brown said in a media release.
“While interest rates were cut 0.25 percentage points in May, this wasn’t enough to offset the increase in average mortgage repayments, and affordability has declined as a result. Demand for property remains very strong, which is maintaining upward pressure on prices, and under current conditions we can expect affordability to decline further over 2025.”
Year-on-year, WA affordability worsened by 1.6pp, though the state retained its title as the most affordable in Australia, behind only the two territories.
WA saw 10,401 new owner-occupier loans in the June quarter, up 8.2% from March but down 3.9% on last year. The average loan size rose to $620,123.
First-home buyers accounted for 35.1% of new loans, with 3,647 commitments – up 6.3% from the previous quarter but 11.8% below June 2024. The average FHB loan size climbed 3.8% over the quarter to $526,652.
Brown said upcoming policy changes could support renewed first-home buyer activity.
“First-home buyer activity was likely to increase again in the September and December quarters with the Reserve Bank cutting interest rates in August and the federal government fast-tracking its changes to the Home Guarantee Scheme from January 2026 to 1 October 2025,” she said.
“The government has removed the income limits for the scheme, increased price caps and removed the limit on the number of places available. This will make the program accessible to more first home buyers, and we expect to see first-home buyer activity increase as a result.”
On rentals, affordability in WA declined slightly, with the proportion of income required rising 0.1pp to 24.1%.
Brown said slower rent growth meant the impact was limited.
“After years of very strong growth, rent price growth is slowing,” she said. “We’re seeing rent prices show periods of stability and there have even been some declines from month to month. More rent price growth is likely over the remainder of 2025, but the impact on affordability should be small.”
Nationally, NSW remained the least affordable rental market at 27.5%, while the ACT was the most affordable at 18.7%.
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