New report reveals that housing affordability plummeted in 2023 amid high inflation and housing challenges
Saving for a 20 per cent deposit now takes a decade. Image: Canva, AI generated.
  • Housing affordability dropped nationally; Sydney's new loans requie 58.1% of income.
  • Melbourne saw improved affordability, credited to more dwellings.
  • Regional Australia loses affordability appeal as values surge.

Concurrent rises in housing prices, rental costs, and interest rates have caused housing affordability to tumble in 2023, according to the latest report by ANZ and CoreLogic.

The recently released ANZ CoreLogic Housing Affordability Report analysed home ownership affordability over 2023, including the variances in market dynamics across Australia’s capital cities and regions.

It took longer to save for a deposit

In the year to September, the time necessary to save for a 20% deposit shot to a decade nationally and 12.6 years in Sydney. In fact, servicing a new loan in Sydney now requires a whopping 58.1% of income.

Years to save a 20% deposit, national, dwellings

Years to save a 20% deposit, national, dwellings
Source: CoreLogic, ANU.

On the other hand, affordability improved to some extent in Melbourne in the past five years to September, where the time needed to save for a deposit dropped from 10.2 years in September 2018 to 9.6 years.

Years to save a 20% deposit, (Sydney vs Melbourne)

Years to save a 20% deposit, (Sydney vs Melbourne)
Source: CoreLogic, ANU.

More dwelling completions largely caused the muted performance and relative affordability of Melbourne’s home prices over the past 15 years. To illustrate, Australian Bureau of Statistics (ABS) data found 21% more home completions in Victoria compared to New South Wales over the same time frame.

Rolling annual completions (dwellings) and the Sydney-Melbourne divide

Rolling annual completions (dwellings) and the Sydney-Melbourne divide
Source: CoreLogic, ABS.

 

The gap between houses and units widen

Furthermore, the price difference between house and unit values soared, hovering at heightened levels of 28.6%. Before the pandemic, the 10-year average difference between house and unit values nationally was at a mere 7.3%.

Difference between national median house and unit median value

Difference between national median house and unit median value
Source: CoreLogic.

“The time to save a 20% deposit has only shifted by around two months nationally for units since the onset of COVID-19, while for houses, the time to save has blown out by almost two years, said ANZ senior economist, Adelaide Timbrell.

“This presents a clear shift for those hoping to enter the housing market, as units have stayed within a reasonable price range for new home buyers, while houses have become more out of reach.”

Regions no longer affordable

Regional home markets also witnessed a continuous rise in purchase values from the beginning of the COVID-19 pandemic at a much swifter pace than their capital counterparts, up by 44.4% and 26.4%, respectively. Thus, regions are no longer affordable alternatives to the capital cities.

“Regional Australia is often thought of as a more affordable alternative for housing, a way to reduce housing costs by compromising distance to major employment hubs,” said CoreLogic head of Australian research, Eliza Owen.

“The COVID-boom in regional migration and values means it’s really not that much more affordable now, and there’s very little difference in the combined regional and capital city affordability metrics.”

Eliza Owen, CoreLogic

Owen predicted housing affordability would worsen in 2024 before it improved.

“Dwelling supply will continue to be strained by the high-interest rate environment, which has reduced approvals and potential for new housing development in 2024. Demand will probably be the only thing that can adjust in the short term, so we may see average people per household rise.”




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