Housing affordability has fallen to its lowest rate on record, with households earning a typical income only able to afford about one in every 10 homes sold across the country.
According to data from realestate.com.au, a household earning a median income of about $125,000 a year could afford just 12 per cent of all homes (houses and units combined) sold nationally in the last financial year.
Despite recent falls in property values, stronger prices last year and recent hikes in interest rates have powered the result and reversed the "marginal improvement" from the 2025 financial year.
The company's senior economist, Angus Moore, said housing affordability is "challenged" as the central bank has increased the cost of borrowing money and repayments on loans.
"The three RBA interest rate hikes made in February, March and May increased mortgage rates and further constrained household borrowing capacity amid an already difficult cost-of-living environment," he said.
"Looking ahead, affordability may improve marginally if home prices continue to soften, but this is unlikely to be a turning point for many buyers.
The figures included in the report were based on a household spending 30 per cent of their gross income on mortgage repayments, with a 2.5 per cent buffer, meaning a household earning just over $125,000 annually could afford to make loan repayments on just 12 per cent of homes sold in the past year.
The data also relies on the median household income instead of the average household income.
For example, if the nation was made up of 99 households ranked from lowest-earning to highest-earning, the amount earned by the 50th one would be the median.
An average figure, however, would add up the earnings of all the 99 and divide them by 99, meaning the result is skewed by some wealthy households. According to analysis of HILDA data by the Grattan Institute, the average Australian household earns $161,000.
Victoria the most affordable, but even it slides
The report found that affordability declined in every state in the last financial year, but did not examine the territories.
South Australia became the least affordable state with just 7 per cent of properties sold affordable for median households.
Victoria was the best performer for people seeking a home, with 16 per cent of properties affordable for median households — but even that has fallen.
Even for people not seeking to buy, the data is tough. Mortgage repayments, relative to incomes, are at the highest point since 1989.
That means they are taking up 35.5 per cent of average household income, higher than during the so-called Global Financial Crisis (GFC) when it was 33.3 per cent.
In 1989, the figure was 37.5 per cent.
Back then, interest rates on mortgages were about 15.5 per cent, compared to 6.3 per cent in June 2026. But they were being applied to much lower house prices and the ratio of "annual income to cost of a house" was much lower.
If home loan interest rates were at 1989 levels today, three quarters of an average household's income would go towards repayments on the average mortgage.
Pressure unlikely to subside soon
Economist Luc Redman said despite a recent fall in property prices, the pressure within the market remains.
"Home prices have remained elevated across the sales distribution — despite a softening in the back half of the financial year — combined with higher interest rates reducing households' borrowing capacity," he said.
The problem, however, is what he calls a "clear structural supply problem" when it comes to having enough places to live.
Maiy Azize is the national spokesperson for Everybody's Home, a coalition of welfare and homelessness organisations that work on the housing crisis.
She said changes to negative gearing and capital gains tax discounts, which have made it less attractive to be a property investor, were a start.
"The government's tax reforms are a great step, but they will take time to work their way through the housing market. These numbers show we need action in the meantime," she said.
However, she said there needed to be more changes if the situation were to improve sooner.
"Governments should put limits on rent increases to give renters some breathing room. That will help people trying to save for a deposit, as well as the growing number of people who will rent for the long term," Ms Azize said.
"Government can build affordable homes at the scale needed, in the places people need them. It also takes pressure off the rental market because fewer people will be competing for affordable rentals."
Borrowers are feeling the pinch
Nadia Harrison is the chief executive of Mortgage Stress Victoria, a legal service that deals with people struggling with housing debt.
She said the body has seen "significant growth in demand" for its services.
"From February 2026, the number of people reaching out for assistance increased by around 30 per cent compared to the monthly 2025 average, and that level of demand has remained steady since," she said.
Ms Harrison advised people who are struggling to meet mortgage repayments should contact their lender for support.
However, that isn't a blanket solution, because not all lenders are legally forced to provide assistance.
Mortgage Stress Victoria wants to see a charter — a broad agreement — that extends hardship provisions to all borrowers.
"At the moment, the rights and protections you have as a home owner in hardship vary depending on the lender you've borrowed from, and the industry code that they subscribe to," she said.
"A mandatory Mortgages Charter which lifts and harmonises hardship protections across the board would go a long way to making mortgages fairer."
