Affordability takes a beating
Housing affordability in Australia has continued to decline, according to the latest report from the Real Estate Institute of Australia (REIA).
The report, released yesterday, revealed that housing affordability had worsened across all states and territories. The proportion of income required to meet loan repayments increased nationally from 30.7 percent in the December quarter of 2009 to 32.6 percent in the March quarter of 2010.
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The decline in affordability has been a long-standing trend, with no improvement seen over the past 12 months.
In March 2009, the proportion of income needed for loan repayments was 28.8 percent. This means that the average Australian household is now spending an additional $143 per month on their mortgage compared to the previous quarter, according to REIA president David Airey.
Among the states and territories, the Australian Capital Territory (ACT) remains the most affordable place to own a home. The proportion of income required for loan repayments in the ACT increased by 0.2 percentage points to 17.9 percent, which is 14.7 points below the national average.
On the other hand, New South Wales (NSW) is the least affordable state or territory in which to own a home. The proportion of income needed for loan repayments in NSW increased by 0.9 percentage points to 34.5 percent.
The decline in housing affordability has been driven by several factors. One key factor is the increase in property prices, particularly in major cities like Sydney and Melbourne. In recent years, these cities have experienced strong demand from both local and international buyers, leading to skyrocketing prices. This has made it increasingly difficult for first-time buyers to enter the market and for existing homeowners to upgrade to larger properties.
Another contributing factor is the low wage growth experienced by many Australians. Despite the overall strength of the economy, wages have remained relatively stagnant in recent years. This means that even though interest rates are at historic lows, many households are still struggling to meet their mortgage repayments due to the proportion of their income being dedicated to housing costs.
The decline in housing affordability is a concerning trend that needs to be addressed by policymakers. Without appropriate measures to improve affordability, more Australians may find themselves locked out of the property market, creating long-term social and economic consequences.