The HIA Affordability Index fell in the June 2015 quarter, signalling a deterioration in affordability conditions, said the Housing Industry Association industry.
“The positive impact of a second interest rate cut for the year in May was overwhelmed by an increase in the CoreLogic RP Data median dwelling price and the persistence of sluggish earnings growth,” said HIA Chief Economist, Dr Harley Dale. “The net negative impact of these factors saw the national HIA Affordability Index fall by 2.9 per cent to 79.7 in the June 2015 quarter.”
“The national affordability result masks wide variations around the country, an unsurprising finding given the lack of geographical consistency to the current residential cycle,” Harley Dale said.
During the June 2015 quarter, affordability deteriorated by 3.6 per cent in capital city markets, driven by Sydney and Melbourne. This was in stark contrast to a 2.7 per cent improvement for regional Australia. Compared with the June quarter last year, capital city affordability worsened by 0.6 per cent, while in regional Australia affordability saw a 5.2 per cent improvement.
“The large differences in the results for the capital city Affordability Index and its regional counterpart, together with the variation in outcomes between capital cities, exposes the folly of sweeping generalisations which refer to an Australian housing boom,” said Harley Dale. “That is simply not what is occurring – in many parts of Australia the extremely low interest rate environment is delivering historically favourable affordability conditions.”
“It is against this backdrop that authorities have escalated their requirements for the rationing of credit to residential investors. The risk is that this will obstruct new housing supply, aggravating affordability conditions in markets around Australia,” concluded Harley Dale.
