Buying a home is becoming almost unattainable for young people

This has negatively impacted all mortgage holders, but the pain has not been felt evenly.

Those with bigger mortgages, especially those who have purchased their homes recently, have suffered most because mortgage repayments represent a greater percentage of their income.

Since younger homeowners are more likely to have purchased recently, and are more likely to have a higher balance outstanding, they have likely borne the brunt of these rate increases.

In fact, families that bought a home in September last year for around, say, $950,000 would be already paying around $700 a month extra in repayments just a year later - plunging many of those households into housing stress.

And the problem will continue to get worse before it gets better, given the lag between an increase in the cash rate and it translating into higher repayments. By February, many will be paying an extra $1000 a month or more.

The effect of interest rates rises on mortgage holders, combined with a general fall in house prices, has taken some of the focus off housing affordability issues.

However, the problem has not gone away. In fact, interest rate increases have exacerbated it because the amount prospective homeowners can afford to borrow has basically fallen off a cliff.

There are two related components of this: the amount that banks will lend has diminished, and the amount that borrowers can afford to pay has decreased.

First, in October last year, APRA increased the minimum interest rate buffer that banks use when assessing new loans from 2.5 per cent to 3 per cent.

This means borrowers in September last year were being assessed against a rate of 5.2 per cent, while those borrowing this September were assessed against a rate of 7.4 per cent.

The specifics of how lenders assess how much borrowers can pay are complex, but changes in the interest and buffer rate likely had a significant impact. A borrower assessed as being able to afford up to $3000 a month in September 2021 would likely have seen the amount they could borrow fall by more than $100,000 by September 2022.

For one assessed at $4000 a month, the reduction was probably in excess of $150,000.

But families looking at buying a first house are factoring in more than just the absolute maximum amount that they can borrow. They are also considering what they can afford to pay - and here the story is no better.

It's worth looking at what has happened to the income of a typical young family with one full-time worker and one part-time worker, compared to prices and mortgage repayments over time.

In September 2019, if that family bought a house at a price of about $675,000, they would pay slightly more than a quarter of their gross income in mortgage repayments (assuming they could find the $135,000 deposit).

However, the housing market was about to boom. By September 2021, house prices had gone up nearly 40 per cent in two years and our typical family would now pay 30 per cent of their income in mortgage repayments.

But things continue to get worse. Even though house prices were about the same in September 2022 as they were 12 months previously (having risen and then fallen by more than $130,000 in that time), the typical house is no longer affordable for the typical family.

On top of having to find a (mere) $190,000 for a deposit, our typical family is now expected to devote more than 35 per cent of their gross income to paying their mortgage.

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Effectively, if our hypothetical family wanted to buy a home now, their mortgage would be 10 percentage points higher as a proportion of gross income than it was even in 2020. This equates to more than $1100 a month extra for the same home in just two years.

With inflation running at more than 7 per cent, childcare and energy costs skyrocketing, and household incomes struggling to keep pace, the percentage of their income that a family can afford to pay for a home has more likely decreased in that time.

Homeownership is now even further out of reach for young borrowers stretching to get their first home.

For years the primary factor holding first home buyers out of the market has been the difficulty of saving up a deposit. Now, the repayments are also increasingly unaffordable for young families.

It is important to understand that these outcomes are the result of deliberate policy choices at several levels of government. Local councils who drag their feet on development approvals. State governments who refuse to undertake land release or change zoning laws and policies. Federal governments who stimulate demand but not supply.

Not to mention the most insidious groups who contribute to this problem: the NIMBYs and anti-development advocates who think this all should be someone else's problem.

Housing affordability is one of the most important intergenerational issues facing our country. Unfortunately, as a nation, we continue to pretend that demand side fiddling and the addition of a miniscule amount of social housing will fix the problem.

The simple fact of the matter is that genuine supply side reform is what is needed to make housing affordable for young Australians.