Major city and regional area housing affordability

Key Findings

The pandemic has impacted affordability for renters and first home buyers in cities and regions in different ways. There has been a modest improvement in rental affordability in some major cities like Sydney and Melbourne (on average), but other cities and regional areas have seen a deterioration in affordability outcomes for both renters and first home buyers.

Rental Affordability

• Sydney and Melbourne have seen a modest improvement to rental affordability in 2021 due to ongoing closed borders driving a decline in net migration, although vacancy rates have been declining. For example, renters in Sydney in the second income quintile can now afford 10% of properties, up from less than 10% in June 2020.
• All other major cities and regional areas have seen a deterioration in affordability outcomes since June 2020, particularly for low to middle income earners. For example, renters in the third income quintile in regional NSW and Vic can afford 30% of rental properties, down from 50% at June 2020.
• Rents are most unaffordable in Hobart, with the bottom three quintiles of income earners being able to afford just 10% (or less) of rental properties in the market. Perth has also seen a deterioration in rental affordability since June 2020, with renters in the second income quintile being able to afford less than 10% of properties, down from 25%.​

First Home Buyer Affordability

• First home buyers have seen affordability deteriorate over the course of 2020–21 for most income levels across Australia (on average) due to strong house price growth, but affordability for prospective first home buyers remains highly dependent on geographical location.
• Hobart experienced the greatest deterioration in first home buyer affordability and is the most unaffordable city for prospective first home buyers. 80% of prospective first home buyers in this market can afford just 10% (or less) of properties, with middle income affordability falling the most over the last year. Income earners in the fourth income quintile can now afford just 10% of properties, down from 40% in June 2020.
• In cities like Perth, prospective first home buyers  experience much more favourable opportunities to buy their first home, with income earners in the second income quintiles being able to afford around 30% of properties in the market.
• Prospective first home buyers in regional areas of SA, WA and Qld continue to experience very favourable affordability outcomes compared with those in some major cities, but affordability has deteriorated substantially in regional NSW, Vic and Tas over the course of 2020–21.​

About this Research

This research analysis builds on the work in the first State of the Nation’s Housing 2020 report, and more recently in the InSites release (April 2021).

This Lorenz curve analysis includes assessments of affordability as at 30 September 2021, and compares this to affordability as at 30 June 2020.

Since June 2020, NHFIC has enhanced its methodology for modelling income, which means the June 2020 Lorenz curves presented in this analysis could differ to the June 2020 Lorenz curves released in the InSites release.