WA housing and rental affordability

WA housing and rental affordability continues to decline in the December 2024 quarter

The most recent REIA Housing Affordability Report revealed that the share of family income needed to cover loan repayments in Western Australia rose by 2.5 percentage points during the quarter, reaching 42.5 per cent.

Housing affordability in Western Australia worsened during the December 2024 quarter.

The latest Housing Affordability Report from the Real Estate Institute of Australia (REIA) revealed that the proportion of family income needed for loan repayments rose by 2.5 percentage points over the quarter to 42.5 per cent.

Compared to the previous year, this marked a 5.6 percentage point increase, based on a median weekly family income of $2,675 and an average monthly loan repayment of $4,931.

REIWA CEO Cath Hart noted that affordability remained under strain due to continued property price growth, which has driven up loan amounts.

“The Perth median house sale price increased 23.3 per cent in the year to December 2024 and the regions have also seen strong growth. As a result, larger mortgages are needed to purchase property,” Ms Hart said.

“The report shows the average loan size in WA rose 7.3 per cent over the quarter and nearly 20 per cent over the year to $598,771, which has seen monthly loan repayments rise.

“There may be a slight reprieve in the next quarter following the RBA’s rate cut in February. For every 0.25 per cent cut in interest rates, the proportion of family income required to service the average loan usually drops by around 1 percentage point. This will of course be moderated by any property price growth over the quarter.”

Housing affordability declined nationwide during the December quarter.

Western Australia remained the most affordable state, with only the two territories offering better affordability.

New South Wales continued to be the least affordable region, with homeowners needing 59.9 per cent of their family income to cover loan repayments.

Loan activity:

Despite the drop in affordability, the number of loans issued to owner-occupiers rose during the December quarter.

“The total number of loans to owner occupiers in WA increased 5.7 per cent over the quarter to 10,659,” Ms Hart said.

“However, this was 1.3 per cent lower than the December 2023 quarter.

“While buyers were still active, our members report rising prices mean they are more mindful of their budgets and are making considered purchasing decisions.”

Ms Hart said the WA property market continued to be supported by higher than average wages and lower than average mortgage repayments.

“The median weekly family income in WA ($2,675) was higher than the national median ($2,528) and the second highest in the nation,” she said.

“The average monthly loan repayment ($4,931) was lower than to the national average of $5,484, and among the lowest in the country.

“These factors put West Australian home owners in a stronger position to weather affordability changes than those in other states.”

Activity among first home buyers also saw an uptick over the quarter.

The number of loans issued to first home buyers climbed 3.6 per cent to 3,852, though this figure remained 9.9 per cent lower than the same period last year.

“Despite affordability challenges, first home buyers continue to play a significant role in the market, accounting for 36.1 per cent of owner-occupier loans,” Ms Hart said.

The average loan size for first home buyers grew by 3.2 per cent over the quarter and 13.9 per cent year-on-year, reaching $497,508.

Rental affordability:

Rental affordability in Western Australia also worsened during the December quarter.

The share of family income required to cover rent payments increased by 0.5 percentage points over the quarter, reaching 24.3 per cent. This was 1.8 percentage points higher compared to the same period in 2023.

Ms Hart noted that although rental affordability had declined, the pace of deterioration seemed to be easing.

“This reflects changes in the rental market in 2024,” Ms Hart said.

“As rental supply slowly increases and the vacancy rate rises, we are seeing the rate of growth slow for Perth median rent prices, which is helping ease the decline in affordability,” Ms Hart said.

Across the country, Western Australia sat in the middle for rental affordability. The Northern Territory (24.3 per cent) matched WA, while Queensland (23 per cent), Victoria (21.5 per cent), and the ACT (19.2 per cent) were more affordable.

New South Wales remained the most expensive state for renters, with 28 per cent of family income needed to cover rent payments.

Rental affordability improved in New South Wales, Victoria, Tasmania, and the Northern Territory, while it worsened in all other states and territories.