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.
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