Tim Lawless talks 10-year housing trends

“Nationally, dwelling values have risen at roughly the same pace as household incomes over the past decade, providing a relatively steady ratio of dwelling values relative to household incomes. At the same time, mortgage rates have fallen to generational lows, leading to an improvement in loan serviceability,” he said in the latest CoreLogic Property Pulse.

“The decade ending in June 2019 has seen the national median dwelling value rise from $382,650 to $516,710, an annual increase of 3.0 per cent. At the same time, household incomes (according to estimates from the ANU Centre for Social Research and Methods) have risen at the annual pace of 3.1 per cent, up from $59,020 per annum in 2009 to $79,872 in 2019.

“Over the same period, average mortgage rates (according to RBA statistics) fell from 5.1 per cent in 2009 to 4.1 per cent in June this year.

“The wash-up from these movements is that housing affordability, based on the ratio of dwelling values to household incomes, is broadly unchanged across Australia, and households are generally dedicating less of their income towards servicing a new mortgage.”

Dwelling values v household incomes

Across the board, the ratio of dwelling values to household incomes has varied over the past decade, Mr Lawless said, moving through a low of 6.1 in late 2012 to a recent high of 7.0 in early 2018.

“In June 2019 the ratio was recorded at 6.5, which is equivalent to where it was in 2009. A ratio of 6.5 simply means the typical Australian household is spending 6.5 times their gross annual household income in order to purchase the typical dwelling,” he added.

“While the national reading is the same as it was 10 years ago, five of the eight capital cities and four of the seven non-capital city regions have recorded an improvement in the ratio of dwelling values to household incomes.

“The lowest ratio can be found in Darwin where the typical household is spending only 3.4 times their gross annual household income to purchase a dwelling (down from 5.6 10 years ago).”

While most areas have seen housing values become more affordable relative to incomes, some areas have seen affordability worsen, the head of research explained, before pointing to Sydney, Melbourne and Hobart as the areas which have seen housing values rise at a faster rate than household incomes.

“The typical Sydney household is now spending 8.2 times their gross annual household income in order to purchase the median value dwelling, up from 6.6 10 years ago. Melbourne households are spending 7.2 times their annual income (up from 6.4 in 2009) and Hobart households are spending 6.5 times (up from 5.9),” Mr Lawless said.

“Across the regional areas of Australia, the only areas where the ratio of dwelling values to household incomes has worsened is Regional NSW (6.6 in 2009/ 7.0 in 2019) and Regional Victoria (4.9 in 2009/ 5.6 in 2019).”