Falling house prices, particularly in Australia's biggest cities, are doing little to improve housing affordability.

Key points: REIA survey shows housing became less affordability at the end of 2018, despite price falls

REIA survey shows housing became less affordability at the end of 2018, despite price falls Real estate agents say tighter borrowing rules making it harder for potential buyers to get credit

Real estate agents say tighter borrowing rules making it harder for potential buyers to get credit Sellers waiting for prices to improve before putting properties on the market

The latest survey released by the Real Estate Institute of Australia (REIA) on Tuesday shows the proportion of income required to meet loan repayments actually increased marginally in the December quarter.

And there is no sign of relief for those wanting to get into the market.

"It's still very difficult for first home buyers," REIA president Adrian Kelly told 7.30.

"It's very difficult for them to access all of that large amount of money at the one time."

'Our property goes down, house prices go down'

Roger and Karen Stern would like to buy a larger property to have some space for their son Zachery. ( ABC News: Jerry Rickard )

Karen and Roger Stern are frustrated.

They want to move out of their cramped high-rise apartment in Sydney's south-east.

"It's quite small now, with an 18-month-old," Ms Stern said.

"We'd really like some more space and probably a backyard for Zachary as well."

Bizarrely, falling house prices have not made that any easier.

"It's pretty much a paper exercise, because our property goes down and house prices go down," Ms Stern said.

"So, it's really the same as when our property was worth more and houses were worth more."

They do not want to move too far from where they are because of Roger's work and the nearby nursing home that Karen's mother is in, but they can't get a big enough loan to afford a house in the same area.

"I don't think it's unreasonable, what we're looking for," Ms Stern said.

"I think what's unreasonable is the banks won't give you the finance to grow.

"When the banks won't finance it, you think, what do I do? Win lotto?

"I think if we can't find an affordable house nearby, then we've just got to stay put in our unit and just be very cosy."

Have Australia's largest cities become too large?

A research program is looking at whether congestion in larger cities is undermining economic growth. ( ABC: John Gunn )

The REIA says banks have been making it tougher for aspiring home owners since the damning findings from the royal commission into the banking sector.

"[Our members] are telling us that loans are being rejected, whereas 12 months ago those sorts of buyers wouldn't have been," Mr Kelly said.

Housing economist Chris Leishman from the University of Adelaide said while he could not see any evidence that banks had substantially changed their lending practices, you would expect some minor adjustments when the market declines.

"In a declining market it is normal practice for lenders to tighten up on lending criteria," he said.

"They often look for larger deposits, more stable contracts."

Dr Leishman argues the housing affordability crisis has taken decades to develop and is not going to disappear soon.

He has been involved in a study at the Australia Housing and Urban Research Institute, which forecasts the number of households that will need some form of housing or rental assistance in the coming years.

In New South Wales, the number is predicted to jump nearly 80 per cent over an eight-year period, to just under 700,000 by 2025.

The rate of increase is slightly lower in Victoria, but is still expected to push the 500,000 mark over the same period.

"There's worry actually that Australia's largest cities have become too large," Dr Leishman said.

"There's an ongoing research program looking at this very issue — is the unaffordability of housing and the congestion of larger cities undermining economic growth?"

Sellers playing the waiting game

Falling prices mean there aren't a lot of houses on the market. ( ABC News )

Dr Leishman also said the flat market meant there were not as many sellers.

"Existing home owners tend to delay selling in a flat market or falling market," he said.

"They wait until prices are rising again, and then sell and trade up to a new property.

"So, there simply isn't the opportunity for aspiring home buyers at the moment."

He said he was not expecting there to be any significant change in affordability in the near future.

"There may be an opportunity, perhaps, in a year or the next 18 months, a slight pause in the market where it's more accessible for more aspiring home owners," he said.

"But then, unfortunately, price growth is likely to continue into the long run."

For the moment the Sterns are prepared to wait it out.

"When the economy gets a bit better, then maybe we'll have a chance," Mr Stern said.

"But at the moment everything's very tight for everyone."