Property market remains steady
Marika Dobbin takes a look at the property results from the weekend.
Housing affordability for first-home buyers worsened again in Australia in the September quarter, as record low interest rates and government grants stoked demand, a report shows.
The affordability index dropped 3.3 per cent in the September quarter, following a 5 per cent slide in the June quarter, according to the Housing Industry Association and Commonwealth Bank, which compiled the data. The HIA represents the residential building industry.
Home loan, stamp duty and borrowing calculators
''The outlook for affordability is not a good one,'' said HIA senior economist Ben Phillips. ''Interest rates are on the way up, the first-home buyers boost is being wound back and progress in reducing the structural barriers to increasing new housing supply is slow."
The RBA raised its key cash rate 25 basis points this month, the first rise since March 2008, lifting the rate from its near 50-year lows of 3 per cent.
In the year and half prior to this month's move, the RBA had dropped rates by 425 basis points, while the Federal Government boosted the First Home Owner Buyer's grant in an effort to fuel demand in the housing market. Immigration growth has also driven the market in recent years.
Rising urban house prices are already prompting some recent migrants to consider returning overseas, while potential immigrants are being discouraged.
The HIA's affordability index fell to 147.9 index points in the September quarter from 153 in the June quarter.
Victoria drops most
Victoria's affordability dropped by 9.3 per cent, the most of any state, while in New South Wales it fell by 5.5 per cent.
In Western Australia, housing affordability fell by 3.9 per cent, while in Tasmania it fell by 5.1 per cent.
In the ACT, it improved 3.8 per cent, as it did in Adelaide, where it increased by 2.2 per cent.
The deteriorating housing affordability tends to hit the lower end of the market most, said the Victorian chief executive of the Sacred Heart Mission Michael Perusco.
''It's irresponsible to see the housing markets only as an investment tool,'' Mr Perusco said.
''The sooner we learn that, the sooner we're going to learn that having a group locked out is no good for anyone and starts to have broader consequences," he said.
Mr Persuco said Sacred Heart's job of finding accommodation for homeless individuals and couples was getting more difficult.
Monthly payments rise
Average monthly loan repayments for a typical first-home mortgage rose to $2087 in the quarter from $1983, an increase of 5.2 per cent, HIA said.
However, as a percentage of first-home buyer's income, mortgage repayments account for only 20.3 per cent, down from 28.3 per cent when the so-called non-affordability gauge hit a peak of 103.1 index points in the March 2008 quarter.
"If we don't succeed in significantly lifting the level of new home building over the next few years then there is a very real risk that we will return to the woeful affordability levels of 2007 and 2008," Mr Phillips said.
The weighted average of home prices increased 4.2 per cent in the June quarter, according to the latest official data. The latest figures from Residex show prices increased by 1.7 per cent in September.
czappone@fairfax.com.au
BusinessDay
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