Deloitte predicts more housing affordability concerns this year

Jodie Humphries 3 April 2017 NEWS

2017 Deloitte Australian mortgage reportPopulation growth, slow wage growth and investors are some of the key concerns affecting housing affordability.

Deloitte has released its Australian Mortgage Report for 2017, where a roundtable of leading lenders and mortgage brokers discussed the home loan market and made predictions for the year ahead. The main theme of the discussions was housing affordability across the major markets and throughout the country.

Property prices have grown by 15.5% in Sydney and 13.7% in Melbourne, despite there being a downward trend in wage growth of 2-3% across all states and industries for 2016. The report expressed concern that the importance placed on investment income has put more pressure on the market, with more property purchased for investment purposes.

“Negative gearing is often mentioned. For many Australians, that is their wealth generation vehicle. Indeed, many first time buyers choose to be first-time investors rather than owner occupiers,” the report said.

The report also mentioned that population growth has caused demand for housing to increase at a rate that isn’t being met by the current supply. However, the report stressed that although increasing supply is a solution for housing concerns, it is not the sole answer.

The report's historical data showed that the population of Australia has grown at an average rate of 220,000 per year in the 20 years to 2005. In 2005, however, there was a sharp increase in the population, with stronger immigration and a baby boom that housing supply could not meet causing property prices to rise.

“Australia’s population growth is likely to stay above 300,000 per year," the report said. "This suggests that the underlying demand for new dwellings will also be notably higher going forward. Housing analysts suggest that underlying demand may now reside in the 180,000-200,000 per year range. This means that if dwellings start to drop back below these underlying levels for any length of time, price pressures will begin to build again."

Looking into 2017, the report predicted that there would be ongoing concern over housing affordability, particularly in Sydney and Melbourne. The mortgage pricing practices of lenders will continue to come under scrutiny from both the public and political spheres, the report predicted.

The report did express some concern over increased funding costs putting pressure on the RBA and lenders to lift rates, which may cause the growth in Sydney and Melbourne to slow but could potentially cause affordability issues outside of the major cities.

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