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Home loans spike by 248% in 20 years: REIA

Tasmania has recorded the biggest fall in housing affordability, with average home loan amounts rising by over 340 per cent in the last 20 years, according to research.

The Real Estate Institute of Australia’s (REIA) Housing Affordability Report, which covers the past 20 years, has revealed that the proportion of family income devoted to meeting average loan repayments has increased from 27.2 per cent in 2001 to 35.7 per cent in 2021.

According to the report, the average home loan amount has risen by 248.7 per cent in the past 20 years, while loan repayments have increased by 179.4 per cent and family income by 112.8 per cent.

Housing was least affordable in September 2008 when almost half – or 45.8 per cent – of income was required to service a loan.

However, as property prices continue to climb, the REIA said that this could become a greater issue in the future.

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The average home loan in 2021 is $548,323, up from $157,239 in 2001 and $407,836 in 2016.

Housing debt to household disposable income for owner-occupied housing rose by 51.4 percentage points between the start of 2001 and March 2021, from 48.8 per cent to 100.2 per cent.

In the first home buyer (FHB) segment, access to the housing market was at its highest in June 2009, when 48.2 per cent of all new loans were from this cohort. In contrast, FHBs comprised only 21.8 per cent of new loans in March 2004.

By June 2021, FHBs made up 37.2 per cent of all new housing loans.

The report explained that FHBs entered the market at comparably higher levels in 2009 and 2020 due to wholesale government stimulus measures in response to the GFC and the coronavirus pandemic respectively, including grants and stamp duty waivers.

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REIA president Adrian Kelly commented that affordability would likely worsen as interest rates rise if policy settings fail to change and household disposable incomes do not rise through, for example, tax concessions for FHBs.

Tasmania

Across Australia, Tasmania recorded the largest deterioration in housing affordability (12.6 percentage points) over the past 20 years, with the proportion of income required to meet loan repayments increasing from 18.4 per cent in June 2001 to 31.0 per cent in June 2021.

Average home loan amounts surged 342.6 per cent from $86,878 to $348,525, while family income increased by 110.0 per cent, and average home loan repayments by 254.6 per cent.

NSW

Housing affordability plummeted by 12.4 percentage points in NSW over the past 20 years, with the proportion of income required to meet loan repayments rising from 31.6 per cent in June 2001 to 44.0 per cent in June 2021.

Average loan amounts increased by 269.3 per cent from $191,081 to $705,65 in the past 20 years, while family income increased by 112.3 per cent and average home loan repayments rose by 195.9 per cent.

The proportion of FHBs increased from only 13.7 per cent in March 2017 to 33.6 per cent in June 2021. Market access for FHBs was at its best in June 2009 when 51.2 per cent of all new loans were from FHBs.

Victoria

In Victoria, the proportion of family income required to meet loan repayments increased from 26.5 per cent in June 2001 to 36.2 per cent in June 2021.

Average home loan amounts increased by 261.8 per cent from $157,064 to $568,188 while family income increased by 112.1 per cent and average loan repayments increased by 189.8 per cent.

New loans from FHBs comprised 40.9 per cent of the market by June 2020, up from 24.4 per cent in June 2017. FHB access to the market was at its highest in June 2009 at 50.7 per cent.

Qld

Housing affordability declined by 5.9 percentage points in Queensland over the past two decades, with the proportion of income required to meet loan repayments increasing from 26.2 per cent in June 2001 to 32.1 per cent in June 2021.

While average home loan amounts increased by 227.4 per cent from $140,918 to $461,414 during this period, family income increased by 114.1 per cent and average loan repayments by 162.3 per cent.

By June 2021, 34.4 per cent of new housing loans were from FHBs, up from only 22.7 per cent in March 2004, but down from a peak of 44.8 per cent in June 2009.

SA

In South Australia, housing affordability worsened by 10.1 percentage points over the past 20 years, with the proportion of income required to meet repayments increasing from 21.5 per cent in June 2001 to 31.6 per cent in June 2021.

Average home loan sizes increased by 254.5 per cent from $113,135 to $401,109 during this period, while family income increased by 93.1 per cent and repayments by 184.0 per cent.

FHBs made up a third of the home buyer market in June 2021, up from 17.0 per cent of new loans in December 2004 but down from the peak of 41.2 per cent in June 2009.

WA

Housing affordability declined the least in Western Australia across the states and territories, with the proportion of family income needed to meet loan repayments up from 24.2 per cent in June 2001 to 26.3 per cent in June 2021.

Average home loan amounts increased by 208.7 per cent from $139,576 to $430,805, while family income increased by 127.5 per cent, and average loan repayments by 147.3 per cent.

Over 44.0 per cent of new loans were from FHBs by June 2021, up from only 23.5 per cent in March 2007, but down from 52.5 per cent in June 2009.

NT and the ACT

Housing affordability dipped by a moderate 3.1 percentage points over the past 20 years in the Northern Territory, with the proportion of income needed to meet loan repayments rising from 19.9 per cent in June 2001 to 23.0 per cent in June 2021.

Average loan amounts increased by 210.1 per cent from $126,974 to $393,757, while family income rose by 115.0 per cent and repayments by 148.4 per cent.

In the ACT, the proportion of income required to meet loan repayments increased from 19.1 per cent in June 2001 to 26.0 per cent in June 2021.

Average home loans jumped by 256.4 per cent from $154,905 to $552,093, while family income increased by 109.6 per cent, and average repayments by 185.5 per cent.

[Related: Regional housing affordability slides faster than capitals]

Home loans spike by 248% in 20 years: REIA
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Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.

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