Housing affordability the worst it has been for over 30 years

AUSTRALIAN housing is at its least affordable for over three decades, according to a new Housing Industry Association report.

The HIA Affordability Index deteriorated by 3.1 per cent in the June quarter 2026, putting Australian housing in its most parlous state since HIA records began in 1994.

HIA’s Affordability Index is calculated for each of the eight capital cities and seven regional areas on a quarterly basis and considers the latest dwelling prices, mortgage interest rates, and wage developments.

“Even with dwelling prices declining in a number of markets, led by Sydney and Melbourne, rising interest rates continued to push up mortgage costs faster than incomes,” said Tom Devitt, HIA senior economist.

“This saw affordability deteriorate in the latest quarter in every market, even those with declining dwelling prices.

“It now takes 1.9 average incomes to comfortably service a mortgage on a median priced dwelling in Australia’s capitals and 1.8 incomes in the regions.

“An affordable home should be serviceable with no more than 30 per cent of the annual earnings of a single average income earner.

“Rising interest rates, surging fuel costs and Australian Government tax hikes and restrictions on investors have damaged market confidence this year.

“Home buyers, especially investors, have pulled back from the market, causing dwelling price declines to continue and broaden into the second half of the year.”

Devitt said this will not be the makings of a sustainable improvement in affordability because it does not address the fundamental demand-supply mismatch that persists in Australian housing.

“When established home prices fall but the cost of land, labour, materials, infrastructure, finance and regulation does not, fewer new housing projects are financially viable,” he said.

“We have already seen three consecutive monthly declines in contracts signed for new home builds.

“Home building volumes are set to be weaker than they would have been without this year’s speed bumps and policy mistakes.

“On the demand side, the underlying need for housing continues to grow on the back of elevated population growth, shrinking household sizes and the replacement of old stock.

“On the supply side, the Australian Government has interrupted an expansion in home building that was already underway, reinforcing the deficit of housing.”

Devitt said once these fundamentals re-establish their dominance over the market, prices will recover and affordability will deteriorate all over again.

“This is the difference between reducing prices and reducing costs.

“If governments want to boost the supply of housing and sustainably improve affordability, they need to reduce the cost of land and construction, not damage market confidence in a way that just temporarily suppresses prices in the established market,” Devitt concluded.