The HIA has just released its Affordability Report for the September 2016 quarter which shows a small improvement in housing affordability, in some states, thanks to rate cuts but offset by rising prices. However, affordability fell in Melbourne and Canberra.
During the September 2016 quarter, housing affordability improved by 0.1 per cent compared with the previous quarter and affordability is now 2.5 per cent more favourable than it was a year earlier.
Affordability improved in six of the eight capital cities: Darwin (+7.8 per cent), Hobart (+7.6 per cent), Perth (+7.5 per cent), Brisbane (+2.7 per cent), Sydney (+1.5 per cent) and Adelaide (+1.1 per cent).
Affordability deteriorated in Melbourne (-2.6 per cent) and Canberra (-1.3 per cent) during the September 2016 quarter.
Comparatively, Sydney remains the capital city with the most challenging housing affordability conditions (affordability index score of 59.0), followed by Melbourne (70.9), Canberra (81.6) and Brisbane (87.9). Affordability is most favourable in Hobart (123.6) followed by Perth (98.0), Adelaide (93.7) and Darwin (86.8).
The HIA said “Over the past year, housing affordability has been helped by the two reductions in interest rates from the RBA. Despite not being fully passed on by lenders, these reductions have helped bring the mortgage repayment burden down a little. However, dwelling price growth remains strong in most capital cities and this has prevented affordability from improving more tangibly. Another challenge to housing affordability is presented by the fact that earnings growth in the economy is close to its weakest in two decades, making it more difficult to dilute the burden of mortgage repayments. With direct and indirect taxation accounting for over 40 per cent of the cost of a new house in some markets, the role of progressing tax reform in order to drive better affordability outcomes can no longer be ignored.”
