Affordability continues to improve

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Queensland recorded the largest improvement in housing affordability across the country in the latest Adelaide Bank/REIA Housing Affordability Report.

The proportion of income required to meet home loan repayments decreased 1.9 percentage points during the June quarter to 26 per cent. When compared to the same time last year, this figure was down by 4.5 percentage points.

Our State’s improvement in rental affordability was also the best across Australia. The proportion of income required to meet median rents dropped 1.1 percentage points to 21.4 per cent. Compared to the June 2012 quarter, the proportion fell by 1.2 percentage points.

Of the total number of first home buyers across Australia who purchased during the quarter, 13.4 per cent were from Queensland. The number of loans to first home buyers increased 17.2 per cent but decreased 41.4 per cent when compared to the figure recorded last year. The average loan to first home buyers decreased 2.6 per cent over the quarter and 0.9 per cent compared to the June quarter of 2012, to $275,800.

The report shows that housing affordability has now been improving for the past two years, with the proportion of income required to meet repayments at its lowest in a decade.

New South Wales remains the least affordable with the proportion of income required to meet loan repayments 5.6 percentage points higher than the nation’s average.

Despite relatively low average loan size and rents, South Australia is one of the least affordable states or territories in which to buy or rent.

According to the report, affordability is improved in all states and territories when compared to the same time last year and no doubt the seven interest rate cuts since November 2011 have played a significant role.

Across Australia, and especially in Queensland, more is required to entice first home buyers back perhaps through stamp duty reforms, access to superannuation and first home buyers’ assistance. They made up just 14.6 per cent of the owner-occupier market nation-wide, a persistently low number compared to the long-run average proportion of 20 per cent.

Victoria had the largest jump in the number of loans to first home buyers over the quarter and Western Australia the largest over the year.

Australia-wide rental affordability improved with the proportion of income required to meet rent payments decreasing slightly to 23.7 per cent, and the quarter showed it is now more affordable to buy than rent in Tasmania.

With the election now behind us, interest rates reduced, and sales volumes rising, it is likely that housing affordability will not stay this low for long.

 By REIQ chairman Pamela Bennett