Housing promises to be the one of hottest topics leading up to next year’s Federal election as affordability hits an all time low.

The quarterly Mortgage Choice Home Loan Report, which highlights home loan trends as well as the intentions of Australian borrowers and potential buyers, revealed the vast majority of Australians want a solution to housing affordability.

Each quarter, Mortgage Choice asks consumers how they’re feeling about entering the property market. Compared with the last result, prospective buyers are moderately more hopeful this quarter with a 46% positivity rating versus 43%.

Unsurprisingly, younger generations said making housing more affordable and increasing support for first-home buyers would be vote winners, while baby boomers placed more importance on boosting housing supply. Regardless of their age, all respondents agreed that housing affordability is crucial for Australia’s future.

Housing policy promises to be a big ballot winner

Mortgage Choice chief executive Anthony Waldron says the recent study sheds light on which housing-related policies matter most to Australian voters.

Mortgage Choice chief executive Anthony Waldron notes Millennials in particular will be paying close attention to housing in the lead up to the election. Picture: Supplied

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“The report reveals those with a mortgage are supportive of increased government intervention to improve housing affordability (71%), but opinion is divided on the measures used to achieve this.

"While almost half (47%) of survey respondents with a mortgage said reforming tax policies would make housing more affordable, 46% surveyed currently negatively gear an investment property and would not like to lose those tax concessions,” he said.

With a Federal election expected in the next six months, an overwhelming 87% of Australians consider housing “somewhat important” in deciding how they’ll vote, with 93% of millennials admitting it would be a deciding factor when they head to the polls.

When asked what would make homeownership more achievable for future generations, nearly 60% thought lowering interest rates was imperative, followed by 49% suggesting stamp duty reform, then 37% hoping for a lower interest rate buffer on mortgages.

Affordability sits at all time lows

In September, the PropTrack Housing Affordability Report 2024 revealed that affordability is now at the worst level on record. A median income household – earning about $112,000 a year – can comfortably afford to purchase just 14% of homes nationally. A dramatic drop from 43% just three years ago.

The decline in affordability is largely blamed on continued high interest rates - at levels last seen in 2011 - coupled with price growth over the past 12 months. Australian households can now afford to buy the smallest share of homes since PropTrack records began in 1995.

“And it's not just on the buyer side. Rental affordability is also at very challenging levels,” explains PropTrack senior economist Angus Moore.

“While it’s slightly easier for renters to get into a home than buyers - a typical household can afford 39% of rentals - it’s still by quite a wide margin the worst we've ever seen. So in this environment, housing is obviously going to be front of mind for a lot of people coming up to the election.”

All eyes on interest rates

Mortgage Choice figures showed more optimism around interest rates with 54% of respondents concerned about rates in October compared with 62% back in June.

“With the cash rate on hold throughout 2024, home loan interest rates have remained relatively stable. We’ve also seen an increase in the availability of homes to buy, with the PropTrack Listings Report revealing new listings in September reached their highest volume since September 2015, giving buyers more choice and more time,” Mr Waldron says.

PropTrack senior economist Angus Moore says more relief is needed in the market, not just interest rate cuts. Picture: Supplied

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“The research reveals that those who are looking to buy in 2025, are waiting for house prices or home loan interest rates to fall to put their plans into action. If the Reserve Bank decides to cut the cash rate in early 2025, we may see the timing of some of these purchases brought forward.”

Mr Moore adds that despite the highly anticipated rate cuts on the horizon, relief will need to come from multiple sources.

“Although there is an expectation there will be a couple of cuts next year, depending on inflation numbers, we’re unlikely to see lots of rate cuts. And while any cut is going to help improve affordability, it's not going to make a huge dent in where we’re at,” Mr Moore says.

Improving supply must be on the agenda

According to the Mortgage Choice report, the housing-related issues of most importance included; making housing more affordable (65%), increasing the supply of homes (47%), increasing support for first-home buyers (37%), rent control (35%) and tax incentives to encourage housing investment (31%).

The study comes just two months after the Housing Industry Association released its annual Housing 100 Report showing that the country’s housing supply is unlikely to meet current or future demand.

According to HIA data, the number of home starts by the nation’s largest builders are effectively flat year-on-year; increasing from 57,716 in the 2022 to 2023 financial year to just 59,981 in the past 12 months.

“As economists we can sound like a broken record, but the only way we can sustainably improve housing affordability, both to buy and to rent, is to have more homes where people want to live. It's easy to say, but it's much harder to do in practice, particularly for the Federal government because a lot of housing supply comes down to to local councils,” Mr Moore says.

“That's not to say there aren't things the federal or state governments can do, but it's a complex issue. We have seen that in recent years national cabinet agreed to build 1.2 million homes over five years, however we're not currently building at the pace we need.

"We are, at the very least, talking about supply, which a pleasing step in the right direction.”