Property: ultimate auction action
House buyers in the red corner battered as soaring auction clearance rates pile on the pain over the weekend.
First-home buyer housing affordability crashed in the final three months of 2009, as would-be purchasers of homes confronted higher interest rates and surging prices.
The affordability index's slide accelerated 18.4 per cent in the December quarter, following a 3.3 per cent fall in the September quarter, according to the Housing Industry Association and Commonwealth Bank, which compiled the data.
The index dropped from 147.1 points in the September quarter, to 120.1 points in the December quarter. The median monthly mortgage payments in that time jumped to $2505 from $2087.
With interest rates expected to rise from their current 3.75 per cent level, surging demand from international investors and a slow growth of new construction, affordability is expected to continue to suffer in coming months, the report said.
Canberra-based academic Phillip Winn said he and his partner have been looking to buy a house but have watched in dismay as home prices continually outpace their savings level.
''What absolutely stuns us - and seems to me to be historically unprecedented in Australia - is that people on a reasonable income (slightly higher than median) can no longer afford to purchase a reasonable house (2-3 bedroom, one bathroom), a reasonable distance from where they work,'' said Dr Winn.
''That is, unless we are willing to embrace a huge level of personal debt - in proportion to annual income certainly beyond anything earlier generations encountered - an option that seems to us to be unwise and most likely unsustainable.''
''Beyond clichés about Gen X-ers' 'Boomer-envy' and Gen Y-ers' 'sense of entitlement' is the reality that ever-rising house prices have overshot income levels to an extraordinary degree in this country,'' he said.
He describes he and his partner as ''savers'' with ''fairly modest'' housing aims.
Hobart, Sydney lead falls
First-home buyer affordability dropped by 22.3 per cent in Sydney, 18.4 per cent in Melbourne, 21.5 per cent in Queensland, and 19.1 per cent in Adelaide.
In Hobart, affordability dropped more than any other capital city, collapsing 28.7 per cent.
In Perth, it fell 16.3 per cent, while in Canberra affordability fell 22.2 per cent.
Capital city home prices rose by an average of 13.6 per cent for the year to December, official data show, pushed up by a shortage of available housing, rising population growth, a strong economy, government grants, as well as by low interest rates and the relaxation of foreign investment rules.
Generation gap
Runaway home prices rises have exposed a gap between older homeowners and younger would-be buyers struggling to get into the market.
The Reserve Bank said in December that many 50-60 year olds had benefited from a strong economy - which hasn't experienced a recession in nearly two decades - to enjoy secure financial positions.
Older homeowners have borrowed more later in life to fund upgrades and expansion of homes, helping drive up prices.
However, typical first-time home buyers, usually under 35 years old, have seen a ''noticeable decline in home ownership over the past 10-15 years,'' the RBA said.
Hornsby, NSW-based Eve Roberts is 29 and bristles at the suggestion that people in her age set have brought the affordability issue on themselves.
''Despite being on reasonable salaries my partner and I can't afford to buy an apartment, or to have children for that matter,'' she said.
''The baby boomers who relish house prices going up are unfortunately to blame - why? Because for many, owning their house is the only thing they've managed to accomplish in their lives and want to see its value go up astronomically.''
''Generation Y having an entitlement issue? Give me a break.''
Ms Roberts said Baby Boomers are short-sighted for not seeing the generational burden that has been allowed to take hold.
''Unfortunately their foresight is so poor that they don't realise that in 10-20 years time, as they struggle to move from room to room and go to the toilet unaided, their children and grandchildren will be too busy working off their mortgages to come and visit them at the nursing home.''
czappone@fairfax.com.au
BusinessDay
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