Homebuyers experienced a greater deterioration in affordability than renters during the second quarter of 2022.

Real Estate Institute of Australia’s (REIA) latest report showed that the proportion of income needed to meet the average loan repayments increased 4.7 percentage points from last year to 38.4% over the June quarter.

This was a higher rate of deterioration than rental affordability — the share of income needed to afford the median rent only increased 1.2 percentage points to 22.9%.

The Reserve Bank made its second increase to the cash rate in June, which brought the cash rate to 0.85%. Since then, the central bank has made three more increases, bringing the cash rate to 2.35% as of September.

Over the period, the number of new loans decreased 17.2% to 93,956, as the number of loans to first-home buyers declined 32.6% to 29,127.

Despite this, loan values still increased, up 11.6% annually to an average loan size of $612,079.

REIA President Hayden Groves said both housing and rental affordability was heavily impacted by the surging interest rates and the lack of supply of residential properties up for sale and for rent.

“The decline in affordability is due to a combination of rising interest rates and higher average loans — average loan repayments increased over the past year by $621 per month,” he said.

This affected all states and territories, with New South Wales experiencing the biggest drop in housing affordability.

Property listings for sale, despite rising over the past month, still pale in comparison to historical levels. The same can be said for rentals, with vacancy rates hitting new record lows.

“Supply chain challenges, rising building costs, and labour shortages mean the pipeline of new homes for sale and rent will remain under long-term average levels,” Mr Groves said.

Mr Grove said state and federal governments must impose policies that would help lift the supply in both sales and rental markets.

“Phasing out stamp duty could increase listings on the market by up to 50% — it is in these big picture economic and productivity reforms we must invest in to address supply shortages.

Photo by rattanakun on Canva.