Hayden Groves, President of REIA recently acknowledged that, due to increasing rate rises, affordability is now indeed a key issue for homebuyers and renters – and unfortunately, it could get even worse.

Currently, REIA is urging the Australian government to reign in affordability issues by prioritising housing supply shortages. According to Groves, housing affordability has significantly declined in most states and territories. In Western Australia, it has decreased 0.1 percentage points and 5.9 in NSW.

The number of first homebuyers has also decreased 0.4% to 37,620. Even more concerning is that owner-occupier dwelling commitments now make up 34.1% of first home buyers – a decrease of 7.8% over the past year.

Put yourself in their shoes

If you’re already a homeowner, think back to when you put your offer in, and how it felt to be independent enough to do so. Think back to when you paid your deposit, and how you felt when you turned the key in your front door that very first day when you moved into your new home…

For many first-home buyer hopefuls in 2022, this is a memorable moment they fear they’ll miss out on as prices continue to rise. As Groves highlights, the average loan size for first home buyers has, in recent months, increased to $470,548 – an increase of 2.5% over the past quarter alone, and a huge spike of 12.9% in the past 12 months.

However, while housing prices increased in every Australian state and territory, it was Tasmania that saw a decrease of 0.4%. Is this something first-home buyers should keep an eye on?

How loans have been affected

The number of owner-occupier dwelling loans increased by 2.2% throughout the December quarter, reaching 110,230 in total; this was seen in Victoria in the way of a 4.1% increase, 1.2% in Queensland, 5.1% for South Australia, 2.7% in Western Australia, and in Tasmania it was 5%. However, NSW saw a decrease of 0.1%, 5.5% in the Northern Territory, and 3.7% in the ACT.

Unfortunately, we are seeing the largest annual increase in loan sizes since 2002. As Groves points out, throughout the December quarter, the average loan size increased to $590,482 – an increase of 3.5% in the past quarter alone, and 17.7% in the past 12 months. The reality is, this is an amount that cuts out a significant number of buyers.

While the average loan size increased across all states and territories over the past quarter, perhaps surprisingly it was the Northern Territory that saw the highest average loan size increase, with a whopping rise of 7.9%. And despite lockdowns and restrictions affecting property sales in Victoria throughout 2021-2022, the state recorded the highest annual increase over a 12-month period, coming in with a 22.6% rise, according to Groves.

So what does this mean for those hoping to buy their first home in the near future? Will buyers be able to afford their dream homes if rates continue to rise? Or will they sacrifice their preferences by opting for a more affordable home in a cheaper area?

COVID-19 may have wreaked havoc on the economy, bringing with it much uncertainty in all areas of lifestyle and business, but one thing is for certain: our advanced stats-driven team at Kitty and Miles are always at the forefront of the changes happening in the property buying industry – no matter how erratic the market may be!

If you’re a first-home buyer, or a current owner looking to upgrade, downgrade or simply buy a home better suited to your needs, we will make your purchase happen to your benefit – regardless of the state of the market and the world!