CoreLogic today released the June quarter Housing Affordability Report for Australia, with results indicating that although housing affordability has recently started to improve, the longer- term view is deteriorating. 

A guide containing valuable insights for governments, authorities and the private sector where change is being effected at all levels, the latest Housing Affordability Report looks at myriad sectors of the housing continuum. It ranges from rental to ownership, with comprehensive measurement across varying factors including; the ratio of home price to household income, the challenge of saving for a deposit, mortgage serviceability and how much household income is required to pay the rent. 

National results indicate that as at June 2018 the price to income ratio was measured at 6.81; a modest reduction from the March 2018 quarter when the national dwelling price to income ratio reached a record high of 6.84. Across the broad dwelling types, the ratio of house prices to household incomes was recorded at 7.1 times, down slightly from the March quarter, while the unit price to household income ratio was recorded at 6.2, which was well down from its 6.6 times peak in late 2015 through to early 2016.

Commenting on the findings, CoreLogic head of research Tim Lawless said, “Those saving hard for a 20% deposit may take solace in the fact that the national average is now 9.1 years for the typical household.” 

“Detached houses are generally more expensive, so take longer (9.4 yrs vs 8.3 yrs for a unit). Five years ago, it took just 8.5 years to save a 20% house deposit and 8.3 years for a unit. A decade ago it took 8.8 years and 8.2 years respectively.”

“Affordability from a ‘share of income required for mortgage payments’ shows improvement. In June 2018, the repayment on an 80% LVR mortgage required 36.3% of gross household income (37.6% to service an 80% LVR mortgage on a house and 26.9% for a unit); a substantially lower share compared with ten years ago when households were dedicating an average of 51.0% of their gross income towards paying the mortgage.”

“This servicing reduction is partly because discounted variable mortgage rates have almost halved over the past ten years (from 8.85% in June 2008 to 4.50% in June 2018). At its peak a decade ago, a repayment on a house required 52.4% of household income and a unit required 48.7% of household income.” 

Despite the national dream of home ownership, it’s still cheaper to rent than repay a mortgage, with both house and unit rents currently costing 26.9% of gross household income. In fact, stronger income growth relative to rents has pushed the national ‘rent to income ratio’ to its lowest level since September 2007.  Even at their peak, rents required less than 30% of gross household income. The relatively healthy rent to household income ratio can be attributed to the low rate of rental price appreciation: national weekly rents have risen only 2.9% per annum over the past ten years, while household incomes have tracked 3.1% higher per annum over the same period. 

At a national level, the past ten years has seen worsening housing affordability, fuelled primarily by strong growth in property prices across Sydney, Melbourne, Regional NSW and more recently Hobart. Australia’s two largest cities of Sydney and Melbourne do have a strong influence over the national trends, but outside these markets, property price growth has been limited and in many areas housing affordability has been improving with rising incomes and falling mortgage rates.

Throughout the individual capital cities, on every measure except rental affordability, Sydney is overwhelmingly the least affordable housing market, followed by Melbourne. Property prices in both cities are now falling, resulting in some moderate improvement in affordability, but both remain significantly less affordable than other capital cities. Darwin is a much more affordable housing market than all other capital cities due to high incomes and an ongoing decline in property prices. Canberra is also more affordable than most other capital cities again due to high household incomes.

For renters, Hobart is now the most unaffordable market. The past twelve months alone have seen Hobart rents rise by 10% while household incomes only climbed 2.0%. At the other end of the rental affordability spectrum is Darwin, where rents have fallen substantially over recent years whilst household incomes have pushed higher.Looking to the regions: regional NSW is much less affordable than all other regional markets due to the strong price growth over recent years. Regional QLD is the second least affordable Australian regional market (due to relatively high prices in large markets such as the Gold and Sunshine Coasts). Regional areas of SA and WA are Australia’s most affordable regional markets due to ongoing property price falls since the end of the mining boom.

Disclaimer: In compiling this publication, CoreLogic has relied upon information supplied by a number of external sources. 
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