Affordability lifts for a third straight quarter as loan sizes rise and first-home buyer demand softens
Australia’s housing affordability has improved for the third straight quarter, while rental affordability has largely held its ground, according to the Real Estate Institute of Australia (REIA).
The trade body’s Housing Affordability Report for the September 2025 quarter showed that the share of median family income needed to meet average home loan repayments fell to 47% in the quarter. This represented an improvement of 0.5 percentage points compared with the previous quarter and 1.6 percentage points on an annual basis.
Source: Real Estate Institute of Australia
By jurisdiction, affordability strengthened across most states and territories, with Queensland the only exception. In that state, the proportion of income required for loan repayments edged higher by 0.1 percentage points.
REIA president Jacob Caine (pictured right), however, noted that recent gains did not remove longer-term affordability risks.
“It’s encouraging to see housing becoming a bit more affordable for Australian families for the third quarter in a row,” he said. “But with first-home buyer activity slightly contracting and higher than anticipated inflation affecting interest rates, many households will still face challenges in the months ahead.”
On the rental side, the proportion of income required to meet median rents held steady nationally at 24.3%, although this figure was 0.5 percentage points higher than a year earlier. Rental affordability improved in New South Wales, Victoria, South Australia and the ACT, while conditions tightened modestly in Queensland, Western Australia, Tasmania and the Northern Territory.
First-home buyer participation weakened over the quarter (however, this is expected to change with the expansion of the 5% deposit scheme in October).
There were 29,252 new loan commitments to first-home buyers, a decline of 3% compared with the June quarter and 0.9% below September 2024. Activity fell in every state except Tasmania, where first-home buyer loans rose by 1.7%. Victoria recorded the highest volume of first-home buyers at 9,835, while the Northern Territory had the lowest with 299.
Despite the softer activity, the average loan size for first home buyers climbed to $560,249, up 1.0% over the quarter and 4.4% over the year.
Overall lending to owner-occupiers was broadly unchanged. There were 84,687 new loan commitments in the September quarter, down 0.2% on June but 1.9% higher than in the same quarter of 2024. The average owner-occupier loan size rose 2.3% over the quarter to $693,802, representing annual growth of 8.1%.
Caine said the recent improvement in affordability needed to be reinforced rather than assumed to be permanent. “This report demonstrates that steady progress is possible, but sustaining affordability for Australians requires ongoing action from government, industry, and the wider housing sector,” he said.
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