New figures have shown affordability plummeting to its lowest point in over 30 years, with borrowers under increasingly intense strain.
The Housing Industry Association (HIA) has said that Australians are facing the toughest home‑buying conditions in more than three decades, with its March 2026 quarter Housing Affordability Index dropping to the lowest level since records began.
In its latest report, the HIA said that housing across Australia is now as hard to afford as at any point since 1994, the year it first started compiling its affordability series.
The national index fell 4.5 per cent in the March quarter to 54.9, a level the HIA said translated to more than 1.8 average incomes being required to service a standard mortgage.
Emphasising the breadth of the squeeze, it said that “every single market across the country saw affordability deteriorate in the first quarter of 2026”.
The report further said that in the March quarter, the median dwelling price across the eight capitals sat at $932,537, with monthly repayments reaching $5,472.
It said that repayments were equivalent to 55.6 per cent of average earnings.
Rates, prices, and wages moving in opposite directions
The report laid out how the first leg of the Reserve Bank of Australia’s (RBA) 2026 hiking cycle had fed into mortgage costs at the same time as prices and wages had moved in conflicting directions.
“The first two rate hikes from the Reserve Bank started to reach mortgage rates during the quarter, diminishing the borrowing power of aspiring home owners,” it said.
“Combined with a very strong 3.4 per cent average dwelling price increase in the quarter, these factors more than overpowered the mere 0.9 per cent increase in average earnings across the country, to see affordability deteriorate.”
The association said that the picture was likely to worsen.
The HIA also expects underlying supply and demand imbalances to keep upward pressure on prices even as affordability collapses.
“Nonetheless, every other market continues to see prices climb and the ongoing supply‑demand mismatch in Australian housing will continue putting pressure on affordability beyond the short term,” it said.
Capitals and regions: Where the strain is greatest
In the capitals, Sydney has retained the position of the nation’s least affordable market, with more than 2.1 average incomes now required to service a typical mortgage.
In what the HIA called “a remarkable turn of events”, Brisbane is closing in on Sydney’s position, with affordability in the city “now just a rounding error below 2.1” incomes and at its worst level since the index began in 1994.
Perth has overtaken Adelaide as the third‑least affordable capital, requiring just under 1.9 incomes to carry an average mortgage compared with around 1.8 incomes in Adelaide.
Melbourne and Canberra sit in a band where around 1.5 incomes are needed.
The HIA said Melbourne “may shortly become more affordable than Canberra”, which would make it the third‑most affordable capital.
Hobart has become more affordable than Darwin, with the report saying that a typical Hobart mortgage requires about 1.31 incomes versus 1.33 in Darwin.
HIA warns against cutting capital for new homes
The report also linked the affordability crisis to decisions regarding how new housing is financed, focusing on looming restrictions on self‑managed super fund (SMSF) residential borrowing.
“Housing affordability requires more homes, not less investment: the restricting of SMSF investment in new housing will make Australia’s housing shortage worse,” it said.
The report said that apartment and town house projects generally rely on hitting minimum presale thresholds before banks will approve construction finance and that SMSFs were one of the investor groups that ensure those thresholds can be met.
“The loss of one source of investment capital may prevent some developments from reaching the presale requirements needed to commence construction. Consequently, the reduction in housing supply may extend far beyond the number of individual SMSF borrowing arrangements themselves,” the HIA said.
Chief economist Tim Reardon said that banning SMSF borrowing misconstrued the role of investment in the housing system.
“SMSFs do not create additional demand for housing because they do not live in the homes they help finance. They provide another source of capital that allows new homes to be built,” he said.
Reardon also criticised the lack of transparent modelling around the SMSF measure compared with other housing tax changes.
“Treasury has undertaken detailed modelling of the budget’s housing taxation reforms. That modelling concluded that restricting negative gearing would reduce housing supply by around 35,000 homes over the coming decade,” he said.
“No equivalent assessment has been released for the prohibition on SMSF borrowing.”
Reardon called for Treasury to analyse and publish the expected impact on commencements, apartment feasibility, and private capital flows.
[Related: Lenders unite to condemn SMSF resi borrowing ban]
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