Australian homes are the most affordable in three years, thanks to rising incomes and falling interest rates.

The Real Estate Institute of Australia’s (REIA) Housing Affordability Report shows that housing affordability improved in the December quarter, with the proportion of income required to meet loan repayments decreasing by 1.4 percentage points to 30.4 per cent.

NSW remains the least affordable state. Credit:Louie Douvis

The result is at its lowest level since December 2009.

REIA president Peter Bushby said housing affordability had been improving over the past year and a half as the Reserve Bank of Australia continued to cut the cash rate.