Household incomes have grown at a slightly faster pace than dwelling values over the past decade, and it would appear as if it has become easier to buy a home. But is this true in every part of Australia?

CoreLogic's Property Pulse showed that the national dwelling values increased by 3% annually in the past 10 years, up from $382,650 to $516,710. At the same time, household income has grown slightly faster at 3.1% annually, from $59,020 to $79,872. Average mortgage rates have also dropped from 5.1% to 4.1%.

"The wash up from these movements is that housing affordability, based on the ratio of dwelling values to household incomes, is broadly unchanged across Australia and households are generally dedicating less of their income towards servicing a new mortgage," CoreLogic head of research Tim Lawless said in a think piece in The Real Estate Conversation.

Also read: Affordability forecast to deteriorate? 

In June 2019 quarter, the dwelling-value-to-household-income ratio was recorded at 6.5, equivalent to where it was in 2009. This means that an average Australian spends 6.5 times their gross annual household income to purchase a dwelling.

The proportion of income needed to repay an 80% loan-to-value mortgage was 34.4% in June, the lowest it has been since 2004. If this is the case, why does it seem like affordability has worsened in Australia?

As it turns out, three capital cities — Sydney, Melbourne, and Hobart — have seen housing values rise significantly faster than household incomes.

"While the national reading is the same as it was ten years ago, five of the eight capital cities and four of the seven non-capital city regions have recorded an improvement in the ratio of dwelling values to household incomes," Lawless said.

In Sydney, for instance, households spend 8.2 times their gross annual income to purchase a dwelling with a median value. This was a considerable increase in dwelling value-to-income ratio from 6.6 in 2009.

The same story unfurled in Melbourne, where respective dwelling value-to- income ratio rose from 6.4 to 7.2, and Hobart, where it rose from 5.9 to 6.5.

"Despite mortgage rates falling to the lowest level since at least the 1950s, households in Sydney, Melbourne and Hobart are generally dedicating a larger proportion of their incomes towards servicing a new mortgage than they were in 2009," Lawless said.

Households in Sydney and Melbourne also allocate higher shares of income to service mortgages at 43.7% and 38.4%, respectively.

"Although housing affordability has worsened relative to ten years ago in Sydney and Melbourne, the decline in home values together with a subtle rise in household incomes and lower mortgage rates has seen affordability and serviceability record a temporary improvement in these areas," Lawless said.

What could be done?

In order to address the issues surrounding affordability, Lawless said it is crucial to look at both supply and demand.

"On the supply side, ensuring infrastructure programs, land release and town planning policies are keeping pace with population growth is important. On the demand side, population growth drives housing demand, as do stimulus measures such as first home buyer grants and tax concessions," he said.

It would also help if people are redirected to areas where housing prices are affordable. The government can do this by incentivising jobs growth and infrastructure improvements.

"Removing stamp duty would also help to improve housing affordability and housing mobility by lowering the transactional costs associated with purchasing a home," Lawless said.