Australia's housing affordability falls to an all-time low

Victoria is the most affordable state for buying a house, according to the annual realestate.com.au Housing Affordability Report released this month.

The report showed national affordability fell to a new low in the 2026 financial year.

The findings are based on the realestate.com.au Housing Affordability Index – a comprehensive measure of housing affordability in Australia – which assesses the share of homes that households across the whole income distribution can afford to purchase.

The report found that throughout the financial year, elevated home prices – despite recent falls – and higher mortgage rates, following the Reserve Bank’s three consecutive interest rate hikes in February, March and May, substantially reduced borrowing capacity.

On top of that, mortgage serviceability, which is the time required to save for a deposit, and home price growth outpacing median income growth, continued to constrain housing affordability across Australia.

Key take outs:

• Nationally, housing affordability slipped to the lowest on record, as a median income household, earning around $125,000 a year, could afford just 12 per cent of homes sold in FY26.

• Affordability declined in every state. South Australia became the least affordable state, while Victoria was the most affordable.

• Low-income households are effectively locked out of the market. A household earning $76,000 could afford just two per cent of homes sold, while a household earning $65,000 per year could afford just one per cent.

• Mortgage repayments reached 35.5 per cent of average household income nationally – the highest share since 1989 and above the Global Financial Crisis peak of 33.3 per cent.

• An average income household saving 20 per cent of income, would need around six years to build a 20 per cent deposit on a median-priced home.

Senior Economist at realestate.com.au Angus Moore said: “The realestate.com.au Housing Affordability Index shows that nationally, housing affordability remains challenged for most Australians, despite the slight reprieve offered last year.

“The three RBA interest rate hikes made in February, March and May increased mortgage rates and further constrained household borrowing capacity amid an already difficult cost-of-living environment.

“This combination pushed affordability to a record low, as a typical-income household in FY26 could afford just 12 per cent of homes.

“Looking ahead, affordability may improve marginally if home prices continue to soften, but this is unlikely to be a turning point for many buyers.

Without a meaningful increase in housing supply, affordability will remain a significant challenge, particularly for lower income households.”

Additional findings:

• Five years ago, when mortgage rates were at record lows, a median-income household could afford 43 per cent of homes sold.

• In South Australia, mortgage repayments consume 43.9 per cent of average income, while saving a deposit takes 7.4 years – the highest of any state.

• First-home buyer schemes and investor activity have increased competition for lower priced homes. The median home price increased by just over five per cent between FY25 and FY26, while household incomes increased by an estimated 4.5 per cent.

• The highest-earning 20 per cent of households could afford the same share of homes as a median-income household could in FY97, highlighting the scale of the supply and affordability challenge.

For more information and to view the full report please visit: www.realestate.com.au/insights or click here.