There was a slight improvement in housing affordability during the September quarter, though it remains at historically low levels, according to the latest data from the Housing Industry Association (HIA).

The HIA’s Housing Affordability Index showed a small 0.5% improvement in the three months to September. However, the index remains 4.4% below the level recorded a year earlier.

“Housing Affordability has been deteriorating in Australia for decades, particularly in capital cities, as demand for new housing greatly exceeded the supply,” said Tim Reardon, principal economist at HIA.

The HIA’s Housing Affordability Index uses a range of recent data, including wages, house prices, and borrowing costs to provide an indication of the affordability of housing.

Reardon added that recent interventions by the federal government and the Australian Prudential Regulation Authority (APRA) to curb growth in investment activity may have improved affordability for owner-occupiers, but reduced affordability for investors.

Towards the end of March, APRA told lenders to restrict higher-risk interest only loans to 30% of new residential mortgages.

“As a consequence of this intervention it appears that the market has responded with higher mortgage rates for investors and eased rates for owner-occupiers,” Reardon said. “This has had the unintended consequence of improving housing affordability for owner-occupiers.”

Irrespective of intent, Reardon said this development was positive news for owner-occupiers looking to enter the housing market.

Housing affordability is particularly strained in Sydney. According to the latest data from the Domain Group, there are no suburbs left in the Greater Sydney basin with a median house price below $500,000.

Those wanting to enter the red-hot Sydney property market would need to save for four decades to afford a 10% mortgage deposit, according to a report from UBS.

The UBS report assumed the aspiring first-home buyer was earning $80,000 annually, was setting aside $4,000 each year, and was saving for a Sydney home valued at $1.2m that increased in price by 3% every year.

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