Housing Affordability Best in 20 Years: With Two Exceptions

Housing affordability is at its highest level in 20 years in most cities in Australia except for Sydney and Melbourne, according to the Housing Industry Association’s latest quarterly index.

The news comes amid softening housing prices, with prices falling in almost every capital city last month.

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

“Housing prices are more affordable in the other six capital cities today than has typically been the case over the past 20 years – primarily due to very low interest rates.

Perth is leading the way in affordability with an average monthly mortgage repayment of $2,194 representing 27.5 per cent of gross average earnings.

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The HIA affordability index is produced quarterly and measures the mortgage repayment burden as a proportion of typical earnings in each market. A higher index result signifies a more favourable affordability outcome.

“The HIA Housing Affordability Index saw a small improvement of 0.2 per cent during the December 2017 quarter indicating that affordability challenges have eased,” Garrett said.

“Softer home prices in Sydney contributed to improved housing affordability during the final quarter of 2017.”

During the December quarter, the largest improvement in affordability occurred in Darwin (+3.6 per cent), followed by Sydney (+3.1 per cent), Brisbane (+1.4 per cent) and Perth (+1.3 per cent).

Home prices in Sydney are now slightly lower than they were a year ago and this is making home purchase a little more accessible, particularly for first home nuyers.

“Affordability conditions in Sydney are still more challenging than any other city. After Sydney, Melbourne has the second highest mortgage repayment burden,” Garrett said.

Related reading: Increasing Supply is no Panacea for Housing Affordability

The average monthly mortgage repayment in Sydney is $4,559 representing 67.5 per cent of gross average earnings, leading the HIA to label it an “acute problem” for affordability.

The average monthly mortgage repayment in Melbourne is $3,566, almost half of what they earn.

The HIA said to win the affordability battle, governments need to make tough decisions on reducing the tax burden on new home building, speeding up the planning process and releasing new residential land in a more timely fashion.

Capitals’ Monthly Mortgage Repayments Compared

• Sydney $4,559 (67.5%)

• Melbourne $3,566 (48.2%)

• Brisbane $2,466 (32.2%)

• Adelaide $2,160 (32.4%)

• Perth $2,194 (27.5%)

• Hobart $2,050 (30%)

• Darwin $2,129 (30.6%)

• Canberra $2,696 (34.4%)