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Housing Affordability and its Toll on Real Estate Agents

Written by Rebecca Gillis
18 January, 2022
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As house prices continue to surge higher around the country,  there are concerns that affordability is now a major issue for potential buyers.

Recently, a report from CoreLogic and ANZ noted that the ratio of housing values to household incomes reached a new record high. Meaning that Australian’s are spending more than ever on their mortgages. At the same time, incomes have been stagnating, and when compared to the high level of inflation we’re currently seeing, in real terms most household incomes are going backwards.

For first home buyers and upgraders, this is a concerning trend and it is contributing to a worse quality of life than most people had only a generation ago, where it was possible to raise a family on a single income alone.

For real estate agents, it’s important to acknowledge the rise in affordability constraints and understand what the impacts might be for home buyers and vendors alike.

Changing Demand Trends

In the past 12 months, property prices across Australia have risen by more than 20% in most areas. However, the surge in capital growth has clearly been led by freestanding homes. With people working from home and stuck inside for extended periods, demand quickly changed from inner-city locations to outer suburbs and semi-regional areas.

Now, we’re starting to see the second stage of the prices rise and how that has impacted affordability. Many freestanding homes in popular areas are simply too expensive which has forced people to look at different options including townhouses or apartments.

This trend is likely to continue and in the short-term, demand for smaller, more affordable types of properties will be high.

More Buyers Using LMI and Other Strategies

For first home buyers today, it’s not uncommon to borrow 95% of the value of the property or even 100%. Going forward, first home buyers are likely going to need to use different strategies for obtaining finance just to get their foot in the door.

Now, it’s already standard practice for this group of buyers to take out guarantor loans, pay LMI to obtain a higher LVR or look to use Government assisted programs such as the FHLDS.

These types of programs and options are helpful, but they do often mean the finance approval process takes longer. For agents, this is important to consider when assessing offers and working with buyers and vendors to facilitate a deal.


Many first home buyers are now faced with the prospect of not being able to buy into their preferred area and for many people in the larger cities, not being able to afford anything at all.

This might lead to a change in approach for younger people, who will look to invest in different areas that are more affordable, such as the regions. In a bid to get their foot on the property ladder. They will then likely rent in their preferred location.

In the past 12 months, we’ve already seen a big surge in the value of regional properties, which has come on the back of owner-occupiers looking to exit the cities and investors getting involved in the rising prices.

When potential clients come to you for advice, it’s up to you to be on the pulse with current market trends, but also how some consumers are navigating through those trends. A true professional real estate agent will be up to date with strategies like rentvesting and making the most of Government schemes such as FHLDS. Clients will appreciate your knowledge in the field.

Older Buyers

In the likes of Sydney and Melbourne, there is a growing trend towards older first home buyers.

Younger couples and singles in Australia’s two most expensive cities are forced to work longer to save for a deposit. We’re also seeing many couples choosing to delay having children simply due to the financial burden of rising living costs, which is predominately due to high mortgages and rents.

For agents, it’s important to understand the demographic that will be buying a certain property and how that is changing with higher prices.

Rising Rates

With many people already stretched to their limit, it’s important to monitor what the RBA chooses to do with monetary policy. While RBA Governor Lowe is still maintaining his stance on keeping interest rates low, there will come a point where they must rise due to ongoing inflationary pressures.

This could lead to lower demand from buyers as borrowing capacity has already started coming under pressure from the likes of APRA who are already raising their serviceability buffer ahead of any potential rate rises.

Rising rates will put further pressure on affordability and exaggerate all already stretch living costs. As a real estate agent, it’s important to understand what your potential buyers are faced with. When coming from a position of empathy and understanding, your clients and potential clients are more likely to trust and identify with you, thus building your relationships.

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Rebecca Gillis

Rebecca works in the Digital Marketing field after graduating from James Cook University with a Bachelor of Business, majoring in both Marketing & Events Management. She has recently moved to the Gold Coast and enjoys getting outdoors to make the most of the great weather.

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