According to a recent report on housing affordability in Australia, the capacity of Australian’s who can afford a house of their own has improved. The percentage of income needed to make payments on housing loans has come down to 30.4%, a decline of 1.4%. But while housing has become more affordable, the number of first homebuyers has decreased. Some experts such as Brian Haratsis – Chairman of Macroplan Dimasi, are of the opinion that more Australians are becoming inclined towards rent housing and they are warning that Australia might become a ‘nation of renters’.
The average income in the Australian Capital Territory (ACT) is high and for this reason, buying a home in the ACT is most affordable among all Australian states and territories. Here the percentage of one’s income required to make loan repayments was as low as 18.7%. New South Wales was the least affordable place. Here the percentage of one’s income required to make loan repayments was as high as 36%.
The median price of an Australian house decreased by nearly 4% over the last quarter, and now stands at $533,000. Hobart and Melbourne recorded the largest increase in median home prices at 7.8% and 7.4% respectively.
Affordability has improved in all Australian States, and South Australia and Queensland are leading the pack. Both saw an improvement of 3.5% over the same quarter last year. Interestingly, the proportion of first home buyers has improved in Western Australia, South Australia, Northern Territory, and Tasmania.
The improvement in the affordability can be attributed to a combination of low interest rates on mortgages – the lowest they have been in the last fifty years and an increase in the weekly median family income by 2.2% over the last quarter to $1616.
On the mortgage front, buyers of first homes are still carefully noting entry points. They have tightened their budgets and they are not willing to take more debt than what is absolutely must. This conservative behaviour is a reflection of the uncertain times. On the whole, it has been found that the market for private home rentals is not able to provide housing supply to people who are earning lower incomes.
The news that housing affordability has increased is good news for the economy since it is something that affects spending patterns and acts to reinforce economic volatility. In some areas, low affordability can also affect employment. When people are not able to purchase homes, it leads to unsustainable and widening inequalities.
When people are not able to afford houses it also pushes them into housing that is at best marginal such as caravan parks and boarding houses.
Therefore for all these reasons, the improvement in housing affordability is cause for cheer.