Housing affordability in Sydney and Melbourne has worsened over the past year, with the share of income spent on mortgage repayments ballooning to a near decade high in Australia's largest city.
Record low interest rates have helped offset a surge in property prices and stagnating household incomes to help keep house prices affordable across most of the country, according to Moody's Australian housing affordability report.
But the low rates have not been able to counter ballooning dwelling prices in Melbourne and Sydney, Moody's said.
Moody's affordability measure, which calculates the average share of income needed to make monthly mortgage repayments, showed that Australian households needed 27 per cent of their income to make home loan repayments -- the same level as last year.
But in Sydney, households needed to commit 35.1 per cent of their income on mortgage repayments, up from 32.8 per cent last year and higher than the 10-year average for the city.
Sydney's housing affordability is nearly at its most unaffordable point in a decade, just shy of the 2008 peak before the Global Financial Crisis saw property prices briefly plummet.
Melbourne's housing affordability also deteriorated over the year, with households needing to spend 28.2 per cent of their income on loan repayments, up from 27.5 per cent a year ago.
A cut to the official cash rate by the Reserve Bank of Australia to 2.25 per cent in February, helped offset some of the house price increases, Moody's said.
However, Sydney home prices have seen a marked increase in speculative lending for property in the record-low interest rate environment, which has pushed house prices 13.9 per cent higher over the year to March, according to CoreLogic RP Data.
While the affordability for units remained steady or even improved across the country, Sydney was the outlier, with the affordability of Sydney's units deteriorating over the past 12 months.