Australia’s Housing Affordability Best in 10 Years: Moody’s

Housing affordability will continue to improve for the remainder of 2018 as housing market conditions continue to soften, according to a new Moody’s Investors Service report.

Affordability improved in Sydney, Perth and Brisbane over the year, but deteriorated in Melbourne and Adelaide.

A softening Sydney property market is good news for homebuyers. Of all Australian capital cities, Sydney is the most sensitive to changes in the three variables: Housing price, income and interest rate changes.

The report shows the proportion of household income needed to meet mortgage repayments fell 2.5 per cent to 35.8 per cent in the year to March. Despite the fall, the harbour city is still one of the nation’s most expensive markets.

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Perth, down one percentage point to 19.2 per cent, rounded out Australia’s two capital cities as the largest price drops across the country.

While housing affordability improved slightly in Brisbane, down 0.6 percentage points to 23 per cent.

"On average across Australia, housing affordability in March 2018 was also better than the average for the past 10 years," Alena Chen, a Moody's Vice President and Senior Analyst said.

A recent report released by the Housing Industry Association, says housing affordability is at its highest level in 20 years in most cities.

“It is often overlooked that affordability conditions are favourable in the markets outside of Sydney and Melbourne,” HIA senior economist Shane Garrett said.

Chen says housing affordability for new mortgage repayments improved marginally as “lower interest rates and moderate income growth outstripped the effect of higher housing prices.”

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"Looking at the rest of 2018, we expect housing affordability to continue to improve moderately on average because of softening housing market conditions, particularly in Sydney and to a lesser extent Melbourne," Chen said.

Melbourne’s market is almost as unaffordable as Sydney. Its housing affordability declined (up 1.9 percentage points to 32 per cent) where housing prices increased strongly by 11.7 per cent over the year to March 2018. However, Moody's expects Melbourne's prices will slow across the remainder of 2018.

Adelaide also saw prices climb 4.2 per cent.