A shortage of housing across the country is creating a rental crisis among young Australians according to the Real Estate Institute of Australia (REIA).
The latest report by the institute revealed that home loan affordability dropped by 3.9% during the last quarter and by 8% over the year. Borrowers now need 35.2% of family income to meet average loan repayments, the highest proportion in 17 years.
New South Wales remains Australia's least affordable state, with 37.2% of family income required to meet average loan repayments. Affordability declined by 2.2% during the quarter and by 1.9% in the year.
Victoria was amongst the hardest hit with housing affordability dropping by 5.3% over the quarter and 10.8% over the year. This is the lowest affordability level in about 17 years. Homeowners in Victoria now need 34.3% of family income to meet loan repayments.
The largest decline in affordability over the quarter occurred in South Australia. Mortgage-paying households now need about 31.9% of their family income as affordability falls by 6.5% for the quarter and 10.8% over the year.
Western Australia suffered the biggest drop (18.5%) in affordability levels over the year, thanks to the sharp rise in house values in the state. Families in this state now need 33.8% of the family income to service their home loans.
"With the erosion of home affordability, it is not surprising that home ownership amongst 25-34 year olds has fallen, and that first homebuyers only represent 17.7% of total homebuyers financed, well below the 10-year average of almost 22%," says Graham Joyce, president of the REIA.
He has referred to young people saving for their first home
as the "Rent Generation", as they are stuck in a rental trap paying ever-increasing rents and unable to save for a deposit. "Vacancy rates are down to around 1% everywhere.
Agents are getting 5-10 applications for every property that comes up for rent or sale. This is pushing up prices and will be an ongoing problem for years; there are no signs that it will be addressed very quickly," said Joyce.
He believes home ownership is not only essential for Gen X and Y now, but also into the future as they will be required to self-fund their retirement with superannuation and voluntary savings.
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now