Housing Affordability Index Q3 2023


12 months ago we thought house prices would probably fall because interest rates were rising, housing affordability was at record lows and interest rates were still on their way up.

Interest rates did go up, but so did house prices. There has been a small moderation in house prices in some capital cities over the last quarter, which means the Australian average high happened in the second quarter of last year.

Overall housing is now twice as unaffordable in terms of repayments, and almost as unaffordable in terms of deposits as it was in the 10 years between 1994 and 2004, which is 100 on our model. Our index for repayments is currently at 209.77 and for deposits at 191.5.

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Darwin (157.16) and Perth (156.20) are the most affordable cities, while Hobart (258.93) and Adelaide (228.86) the least affordable on the basis of repayments. Our index takes into account local average weekly earnings, so it is possible for a market to be expensive for those who live there, while based on house prices it looks cheap on the basis of other capital cities.

We still believe that house prices will need to fall, although speculation in the market is that interest rates will fall. If they do, this will cure some of the problem, and we are analysing how that might affect affordability.


The Q3 2023 Australian housing market saw a general decrease in the Repayments Index and a decrease in the
Deposit Index. This means it was slightly easier to save for a property deposit and also slightly easier to repay a

Aggregating across Australia, national housing repayments decreased by 3.27 index points, whilst deposit costs
decreased by 2.99 points. Median house prices have been falling since the fourth quarter 2021 with a drop of 5.18%
over that period. Melbourne, Hobart and Canberra fell the most, while Adelaide, Darwin and Perth appear to be still

Housing transfers data also indicate a decline in relative market activity with all states reporting a drop when
compared to figures from the 2nd quarter of 2023. The decline was most marked in Hobart, Darwin and Canberra.
While higher interest rates have caused a small fall in house prices over most of the last two years, repayment
unaffordability has continued to rise in a number of markets. Compared to 30 years ago it is approximately twice as
hard to afford to buy a residential property.

Previous analysis has found that interest rates explain around 70% of house price movements. That relationship has
broken down to some extent as rates have risen substantially while house prices have merely moderated. Other
factors are at play – specifically inflation and immigration.

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