Latest REIA data show bigger loans and higher income share going to repayments
Australia’s housing affordability worsened in the December 2025 quarter as more first-home buyers entered the market under the expanded 5% Deposit Scheme, according to the latest Housing Affordability Report from the Real Estate Institute of Australia (REIA).
The federal government’s widening of the scheme has lifted participation among new buyers but has also coincided with higher average loan sizes, placing additional strain on household budgets.
According to the report, average home loan repayments now absorb 49.2% of median family income. This represents a deterioration in affordability of 2.2 percentage points over the December quarter. For brokers and lenders, this means more borrowers are approaching serviceability limits even as access to the market has broadened.
“The expansion of the 5% Deposit Scheme has clearly succeeded in enabling more Australians, particularly first-home buyers, to enter the housing market,” said Jacob Caine (pictured right), president of the Real Estate Institute of Australia.
“However, the consequence has been that many new buyers have been able to commit to larger loans under the scheme, which has increased the proportion of household income required to service a mortgage.”
On an annual basis, however, affordability remains slightly better than a year earlier. The share of income required for mortgage repayments is 0.7 percentage points lower than in the December 2024 quarter, when higher interest rates placed greater pressure on existing and prospective borrowers.
The deterioration in the latest quarter was broad-based across the states and territories. Declines in affordability ranged from 1.1 percentage points in the Australian Capital Territory to three percentage points in Western Australia, indicating that repayment burdens increased nationwide despite some regional variation.
Rental affordability was comparatively steady, with tenants spending 24.3% of income on the median rent. Conditions nonetheless tightened modestly, as the proportion of income needed to cover rents edged higher.
Source: Real Estate Institute of Australia
The REIA report also shows an above-average number of first-home buyers entering the market, reflecting the role of the deposit scheme in reducing upfront savings requirements.
“Reducing the deposit hurdle is helping more Australians achieve home ownership,” Caine said. “But policies that stimulate demand must be considered alongside the broader housing affordability picture.”
He added that supply remains the key constraint in restoring sustainable affordability outcomes. “Demand-side initiatives can support home ownership, but improving housing affordability ultimately requires supply to keep pace with demand,” he stressed. “Ensuring Australia delivers enough housing will remain critical to improving affordability outcomes in the years ahead.”
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