The combination of lower home prices, improvements in wage growth and lower interest rates have contributed to ongoing improvements in housing affordability according to the HIA’s Affordability Index for the June 2019 quarter.
Realmark Group Managing Director John Percudani said this provided the perfect time for buyers to reassess their property position and also look at different financing options with interest rates the lowest they had been in two decades.
“When you look at the combination of tax cuts, low-interest rates, a loosening of lending restrictions and improving wage growth there is definitely more of a favourable environment for home buyers than there was during the property boom,” Mr Percudani said.
“This increase in housing affordability in conjunction with the easing of APRA restrictions on mortgage lending and the Australian Government’s First Home Loan Deposit Scheme will all encourage first home buyers into the market and better enable property owners to trade up.”
HIA’s Affordability Index is calculated for each of the eight capital cities and regional areas on a quarterly basis and takes into account the latest dwelling prices, mortgage interest rates and wage developments.
Housing affordability grew 2.6 per cent in Perth and Brisbane in the June quarter, while in Melbourne it lifted 3 per cent and in Sydney 2.4 per cent. Darwin saw the greatest affordability improvement, with its index rising by 4.8 per cent.
HIA senior economist Geordan Murray explained the main reason the HIA Affordability Index today was comparable with the level in 1999, despite house prices rising significantly faster than incomes, was that interest rates were 4.6 per cent today compared with 6.7 per cent in 1999
“For a home buyer with an average income purchasing a median-priced dwelling, assuming a 10 per cent deposit, mortgage repayments will consume the smallest proportion of their earnings since 1999,” he said.
Mr Murray said average earnings have increased by 113 per cent over the last 20 years, while the median home price has increased by 228 per cent. But lower interest rates mean the cost of servicing a loan has remained the same.
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