Housing affordability continues to deteriorate

By |

While housing affordability continues to decline across Australia, rental affordability improved in New South Wales and Queensland during the December quarter, according to the latest research from the Real Estate Institute of Australia (REIA) and Adelaide Bank.

The December quarter edition of the Adelaide Bank/REIA Housing Affordability Report found that the amount of median family income required to meet average loan repayments had increased by 1.3 percentage points to 31.6% over the quarter.

“At the same time, the number of loans increased across the country by 1.5 per cent, with increases in each state and territory except New South Wales and Western Australia,” said Malcolm Gunning, president of REIA.

Rental affordability continues to vary across the states and territories.

“Over the quarter, the proportion of median family income required to meet rent payments increased by 0.1 percentage points to 25.8 per cent, with rental affordability declining in Melbourne, Adelaide, Hobart, Darwin and Canberra and stabilizing in Western Australia,” Gunning said.

On a more positive note, the number of loans to first-home buyers continues to grow, with 30,894 new loans, the highest number since December 2009. The number of first-home buyers rose by 6.8% for the quarter and by 32.6% over the twelve months.

“First-home buyers now make up 25.8 per cent of the total owner-occupied housing market (excluding refinancing). This is the highest rate since December 2012 after dropping steadily over the past 5 years,” Gunning said.

Managing the affordability crisis

Both the Grattan Institute and REIA/Adelaide Bank recommend a significant increase in housing supply if there is to be any substantial improvement in affordability.

According to a new report from the Grattan Institute, Housing Affordability: Re-imagining the Australian Dream, building an additional 50,000 homes annually for a decade could render house prices 5-20% lower than they currently are. 

While this may appear to be a simplistic solution, Gunning said that unless there is a coordinated and aligned approach by all three levels of government, delivering this new supply would be virtually impossible.

“We need to address this with some urgency and reform the planning and approval process. We need all tiers of government involved and implementing change,” Gunning said.

“REIA believes a first step in this is the appointment of a Minister of Property Services. This would also recognise the importance of the property sector as a driver of economic growth and employment. Property investment supported by historically low interest rates has been a significant contributor to growth in the Australian economy since 2013/14 as we transition away from a decade-long reliance on mining.”

The Grattan Institute recommends that state governments fix planning rules to allow more homes to be built in inner- and middle-ring suburbs in the largest cities. More small-scale urban projects should also be allowed without council planning approval.

“State governments should … allow denser development ‘as of right’ along key transport corridors,” the Grattan Institute said. “They should swap stamp duties for general property taxes. And state land taxes on investment property should be flat rate with no tax-free threshold, to encourage more institutional investors likely to provide longer-term tenancies.”

Related Stories:

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Top Suburbs : campsie , chermside , mt colah , the basin , flemington


Get help with your investment property

Do you need help finding the right loan for your investment?

When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus an appointment is free.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here