Housing Affordability Improves

September 17th, 2015
According to the latest Housing Affordability Report by the Adelaide Bank and Real Estate Institute of Australia (REIA), housing affordability has improved during the June quarter. While discrepancies exist between Australian states and first home buyers are still struggling to get into the market, a rise in average family income and a drop in interest rates has helped to improve conditions across the country.

“The latest Adelaide Bank/REIA Housing Affordability Report shows that the proportion of median family income required to meet average loan repayments was 30.3%. The figure decreased 0.5 percentage points during the quarter and 0.6 percentage points compared to a year ago largely supported by declining interest rates and rising income.” said REIA President Neville Sanders.

The national median weekly family income increased by 0.4 percent over the quarter to $1,622 per fortnight, with the latest cut in official interest rates resulting in an average monthly loan repayment of $2,128. While Aussies are still paying a lot more for housing than they were a few years ago, low interest rates, high wages, slowing population growth, and the current construction boom are helping to close the gap.

New South Wales was the only state to record a decline in housing affordability, with high prices in the Sydney market continuing to influence state-wide levels. Home prices were the most affordable in the ACT, with South Australia recording the biggest improvement over the quarter due to a fall in the average loan size. A median house costs 25.5 percent of weekly household income in South Australia, with SA now having the narrowest gap between buying and renting of all the mainland states at just 2.1 percent.

Rental affordability also improved nation-wide over the quarter, with 25.0 percent of median income now needed to pay median rents, or 5.3 percent less than the average mortgage. The ACT, Tasmania, Western Australia, Queensland, and Victoria all recorded improvements, with high rents in Sydney helping to skew the NSW results. According to a separate study by CoreLogic RP Data, rental increases are at their slowest pace on record at just 0.7 percent over the year.

First home buyers are still struggling to get into the market according to Sanders, with high prices and lending restrictions making it hard for many: "The Australian Bureau of Statistics made revisions to the original series as a result of improved reporting of survey and administrative data, and updated first home buyer modelled estimates. Despite the revision, it is clear that first home buyers’ presence on the market is still low compared to the long-term average. In the Northern Territory, the proportion of first home buyers on the owner-occupier market is just above 12.0% with the Territory recording the largest annual drop in the number of first home buyers across the country."