Driven by further interest rate reductions, Housing affordability continued to improve in the September 2013 quarter, according to the Housing Industry Association (HIA)-Commonwealth Bank Housing Affordability Index.
"Despite widely-publicised dwelling price increases in some markets in recent months, affordability has continued to improve as a result of reduced interest rates," said HIA senior economist, Shane Garrett.
The Index improved in every one of the seven capital cities it covered. The strongest quarterly affordability improvement occurred in Hobart, with a rise of 10.1%, followed by Canberra (6.3%), Perth
(3.2%), Melbourne (2.6%), Adelaide
(2.4%), Brisbane (1.5%) and Sydney (0.5%).
Nationally, the index increased by 3.2% in the September 2013 quarter, to a level of 75.1. The aggregate capital city affordability index increased by 2.6% over the September 2013 quarter to reach 72.2 - a level that’s 15.2% higher than in the September 2012 quarter.
The increases were stronger across regional Australia, with the affordability index rising by 3.4% over the quarter to reach 78.2. This level is 17.4% higher than in the same quarter in 2012.
The RBA has cut rates by a total of 225 basis points since late 2011. As a result, said Garrett, the discounted variable rate for mortgages has declined from 7.05% to 5.18% over the same period.
"Affordability has been further enhanced by continued increases in weekly earnings over the past year,” Garrett said.
Outside of the capital cities, affordability improved in the September 2013 quarter in four out of six non-metro regions reported. The strongest quarterly improvement was for regional Victoria with a rise of 5.1%, followed by the non-metro areas of Queensland (4.4%), New South Wales (2.8%) and Western Australia (2.5%). Affordability declined by 1.2% in regional Tasmania and by 2.2% in regional South Australia.
The Affordability Report's recent addition of an index tracking new house prices relative to established house prices provides an indication of the affordability advantage to be found among new houses.
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