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Sluggish new house supply has exacerbated affordability problems for prospective home buyers.
Housing affordability has deteriorated further with the average number of years required to save for a deposit rising to a near-record high of 10.6 years, according to new research.
The State of the Housing System 2025 report, published by the National Housing Supply and Affordability Council (NHSAC), found that 50 per cent of median household income was needed to meet repayments for the average new mortgage, while 33 per cent was needed to meet rental costs for the average new lease.
The average time required to save for a 20 per cent home deposit increased from 10.1 years in December 2023 to 10.6 years in December 2024, according to the report.
Mortgage affordability deteriorated in 2024, with mortgage costs the largest ongoing housing costs for home buyers.
The share of median household income needed to service a new mortgage rose from 48.1 per cent in December 2023 to 50.5 per cent in December 2024.
That was driven by elevated interest rates and rising housing prices, which reduced home buyers’ ability to service loans.
However, NHSAC said that although high interest rates have contributed to lower levels of mortgage affordability, the impact of rate cuts will improve the borrowing capacity of prospective borrowers as the central bank continues its rate-easing cycle.
NHSAC said the findings presented a sobering view of Australia’s housing system.
The rise in dwelling prices outpaced the rise in household income, making housing less affordable, though at a slower rate than in 2023.
NHSAC said that worsening affordability in 2024 largely reflected rising housing costs as new housing demand exceeded supply. However, affordability is expected to broadly stabilise and in some cases improve a touch over the next few years, the research found.
The supply of new homes was around its lowest point in about a decade in 2024, with 177,000 dwellings completed. Net new housing supply “fell significantly short of new underlying demand”, NHSAC said.
Around 938,000 dwellings are expected to be completed during the federal government’s Housing Accord period (which started on 1 July 2024), a shortfall of 262,000 on the target.
‘Immense pressure’ on system
NHSAC chair Susan Lloyd-Hurwitz said Australia remained “very much in a housing crisis that has been decades in the making”.
“The Australian housing system continues to experience immense pressure,” Susan Lloyd-Hurwitz said.
“For many Australians, right across the country, securing a home that is affordable, fit for purpose and secure remains challenging, if not impossible. This is a source of significant stress for individuals and households.”
Despite ongoing supply challenges, Lloyd-Hurwitz said that building cost pressures were easing, with construction costs stabilising and growth in housing prices and advertised rents having slowed over 2024.
In the wake of the report’s findings, NHSAC called for “significant systemic reform” and said government support measures and industry innovation were needed to improve housing supply and affordability.
‘System is in crisis’
Reacting to the report, Property Council CEO Mike Zorbas said more had to be done to increase productivity in the construction sector, simplify planning systems, and encourage investment.
“The alarm bell continues to sound on national housing supply,” Zorbas said.
“The sad fact is that many Australians feel that homeownership is out of reach.
“We have seen the federal and state governments coordinate their efforts on boosting supply, but more must be done.
“Our skills and planning systems are not yet match fit for this century. More than 30 per cent of the cost of a new home is government taxes and charges.”
Maiy Azizie, a spokesperson for Everybody’s Home, a national campaign to address the housing crisis, said: “This report echoes what Australians are feeling every day: the housing system is in crisis. The message is clear – we’re not building enough social housing and the tax system is stacked in favour of investors over people looking for a place to live.
“Australia is facing a severe housing crisis which demands immediate government action.
“This report is also a wake-up call about the need to reform the tax system so that it helps renters and first home buyers instead of hurting them.
“Our housing crisis didn’t happen overnight, but today’s report helps set out a roadmap for action. We need bold, systemic reforms that ensure safe and affordable homes are at the top of our priorities.”
[Related: Housing affordability fears add to mounting financial stress]
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