Low rates helping affordability
Housing affordability has seen a marginal uplift due to low interest rates.
The Housing Industry Association’s (HIA) Affordability Report for the September quarter shows a small improvement for housing affordability versus the previous quarter. Housing affordability edged up 0.1% over the quarter, to sit 2.5% higher than a year earlier.
The report comes little more than a month after analysis by the Real Estate Institute of Australia (REIA) and Adelaide Bank claimed housing affordability was at its best level since 2009.
“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,” HIA senior economist Shane Garrett said.
Garrett said strong house price growth across most of Australia’s capital cities had kept affordability from showing a more tangible improvement.
“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,” Garrett said.
While affordability improved across most of Australia’s capitals, Melbourne and Canberra’s property markets became less affordable over the quarter. Affordability declined 2.6% in Melbourne, and 1.3% in Canberra.
Garrett used the figures to push for lightening the tax burden on new housing.
“With direct and indirect taxation accounting for over 40% 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,” he said.