Housing affordability at GFC levels
Housing is now at its most affordable level since the depths of the 2009 global financial crisis, an industry survey suggests.
The latest HIA-CBA Housing Affordability Index which tracks the relationship between household income, mortgage costs and home prices shows conditions have improved dramatically for would-be buyers trying to enter the property market.
A combination of rising wages, interest rate cuts and minimal house price growth have seen measures of affordability rise for the past eight quarters in a row - ever since house prices peaked in mid 2010 and started to decline.
Affordability rose 5.5 per cent in the December quarter last year, an 18.4 per cent rise on the same period in 2011, the HIA said.
Melbourne’s affordability measure improved 4.1 per cent on previous quarter and was up by 25 per cent since the local market’s price peak in December 2010.
Sydney’s measure improved by 5.3 per cent on previous quarter, but it was still the least affordable city in Australia.
Melbourne ranked next while Hobart was the most affordable in the country.
“For regional areas, affordability is at levels last seen during the early 2000’s decade,’’ HIA Senior Economist Shane Garrett said.
“It is worth noting that affordability would be even more favourable to householders had recent RBA rate cuts been passed on fully by lenders,” he said.
The slower growth in house prices and Reserve Bank’s interest rate cuts at the end of last year were having an impact on affordability, Mr Garrett said.
But despite being more affordable ‘‘transactions activity on the ground is very sluggish,’’ prompting the HIA to call for further interest rate cuts.
Further rate cuts appear unlikely with the RBA deputy governor Phil Lowe saying this week interest rates were already at record lows.
A swag of recent cuts have ‘‘brought the cash rate down to 3 per cent, which is equal to the lowest level on record,’’ Mr Lowe said.
‘‘Despite what one often hears, households do appear to be feeling better about both their finances as well as Australia’s medium-term prospects,’’ Mr Lowe said.
The interest rate cuts were having an effect on asset prices, improving conditions in the housing market and lifting consumer confidence but they had not lowered the exchange rate as expected, he said.
Home vendors face an end of summer test this weekend with 700 dwellings in Sydney and 1200 in Melbourne expected to go under the auction hammer.
Both cities have so far withstood larger numbers of homes being offered for sale, recording healthy clearance rates around 70 per cent.