Higher interest rates and spiralling land prices have seen housing affordability fall to its lowest level in two years according the latest Commonwealth Bank-HIA housing report.
The report says that housing affordability for first home buyers fell by 6.0 percent in the June quarter even after taking into account the availability of the first home owners grant.
Ruth Morschel, the HIA’s director of public affairs and policy, says that although the growth in median house prices was slowing gradually, the effect of interest rate rises had been the dominant factor in the quarter, adding around $44 a month to the average mortgage payment.
“The current pause on interest rates is welcome news for builders and home buyers and will relieve some pressure on affordability,” she says. “However there are risks to housing affordability from spiralling land prices.
“While the New South Wales problems have been widely publicised, it is by no means a Sydney only problem. There are now similar reports coming from Adelaide, Brisbane and parts of Melbourne.
“It is important that state governments understand the importance of timely land release in order not to create artificial shortages.”
The June affordability index shows that the loan repayment needed to service a typical first home mortgage rose by $92 a month to $1245, absorbing 20.9 percent of average household income. In the March quarter, 19.8 percent of household income was required to meet mortgage commitments and in the June quarter of last year, 18.7 percent.
Source: Building Products News.
