Average loan size up 20% in a year as WA affordability worsens
Despite Western Australia remaining as Australia’s most affordable state for housing loan repayments, recent REIA data has confirmed that the proportion of income needed to make repayments has increased.
The Real Estate Institute of Australia’s (REIA) latest Housing Affordability Report revealed that the proportion of family income needed to meet loan repayments in Western Australia rose 2.5 per cent over the December 2024 quarter to 42.5 per cent.
Based on the median weekly family income of $2,675 and average monthly loan repayment of $4,931 in Western Australia, this movement marked a 5.6 percentage point increase from the December quarter of 2023.
CEO of the Real Estate Institute of Western Australia (REIWA), Cath Hart, said that affordability continues to be impacted by strong property price growth, and has seen the size of loans increase.
“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,” Hart said.
“As a result, larger mortgages are needed to purchase property,” she added.
The report also showed that the average loan size in Western Australia rose 7.3 per cent over the quarter and by nearly 20 per cent over the year to $598,771, which has led to monthly loan repayments increasing.
Hart said that the Reserve Bank of Australia’s recent rate cut last month may be a “slight reprieve” in the next quarter.
“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,” Hart said.
“This will of course be moderated by any property price growth over the quarter,” she clarified.
Affordability worsens across the board
Across the nation, housing affordability declined in every state and territory over the last quarter of 2024.
Western Australia remained the most affordable state over the quarter, with only the two territories coming in as more affordable, and home owners requiring 36.4 per cent and 34.3 per cent of family income to meet loan repayments in the ACT and Northern Territory, respectively.
On the other end of the spectrum, NSW was once again the least affordable place in the nation, with home owners requiring 59.9 per cent of family income to meet loan repayments.
Loan activity shows momentum
Despite the decline in affordability, the number of loans to owner-occupiers nationwide increased in the December quarter.
Within Western Australia, the total number of loans to owner-occupiers rose 5.7 per cent over the quarter to 10,659.
Nevertheless, Hart said that this result still registered 1.3 per cent lower than the levels recorded during the December 2023 quarter.
Even though buyer activity persisted over the last quarter of 2024, REIWA’s members observed that rising prices resulted in buyers being “more mindful of their budgets”.
Over the quarter, the median family income in Western Australia ($2,675) was higher than the national median ($2,528) and registered as the second highest in the nation.
The state’s average monthly loan repayment ($4,931) came in as lower than the national average of $5,484, which was among the lowest in the country.
Hart noted that the Western Australian property market had been propped up by these higher-than-average wages and lower-than-average mortgage repayments.
“These factors put West Australian home owners in a stronger position to weather affordability changes than those in other states,” she said.
Western Australia’s rental affordability takes a hit
Rental affordability declined in the state over the December quarter, with the proportion of family income needed to meet rent repayments rising 0.5 percentage points to 24.3 per cent.
This result came in 1.8 per centage points higher than the rental affordability levels recorded in the December quarter of 2023.
Across the nation, Western Australia remained in the middle of the pack for rental affordability, and was equal to the NT (24.3 per cent), but not as affordable compared to Queensland (23 per cent), Victoria (21.5 per cent) and the ACT (19.2 per cent).
NSW also remained as the least affordable state for tenants in the December quarter, with 28 per cent of family income needed to meet rent payments.
Despite the decreases in rental affordability within Western Australia, Hart said that the rate of decline currently appears to be slowing.
“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,” she concluded.