Housing Industry Association (HIA) reported on Tuesday that affordability in Sydney and Melbourne improved during the September quarter.
The 2018 HIA Affordability Index for Sydney – a 9% uptick compared to the previous year – registering the biggest improvement in affordability among capital cities. Notably, though, New South Wales’ capital remains the least affordable market in Australia.
Melbourne’s affordability, on the other hand, tracked higher, albeit to a lesser degree than in Sydney.
HIA Acting Principal Economist Geordan Murray said that declining home prices over the last year drove the improvement in affordability.
Taking a broader perspective, HIA noted that it will take longer before affordability can be completely restored in the nation.
“The downturn in home prices is yet to run its full course. As the price cycle progresses affordability will continue to improve and this could be bolstered by wages growth,” shared Murray.
“Affordability has been deteriorating over a number of decades and it will take many decades of concerned effort by governments at all levels to reduce the constraints and punitive taxes on housing that have led to the creation of the affordability challenge.”
Currently, the HIA Affordability Index for the country is at 76.3 in the September quarter. This is 1.5% and 2.2% higher than in the previous quarter and in the same period in 2017, respectively.
HIA refers to affordability as the ratio between the average full-time wage to the qualifying income. Based to 100, a score of 100 would mean that an individual making the average wage could comfortably pay less than 30% of their income a mortgage on a median priced property.
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