‘Strong price growth’ impacting affordability in WA
Australia’s largest state by size may be the most affordable jurisdiction for home owners, but rising prices have resulted in an affordability decline.
As reported last week, national housing affordability declined in the June 2024 quarter to the lowest point since the Real Estate Institute of Australia (REIA) first began monitoring in 1996.
The institute’s recent Housing Affordability Report found that the proportion of family income required to meet loan repayments in Western Australia rose 1.7 percentage points over the quarter to 39.5 per cent.
This marks, REIA noted, a 4.8 per cent increase year-on-year, based on a median weekly family income of $2,630 and an average monthly loan repayment of $4,504.
In a statement, REIWA chief executive Cath Hart reflected that strong price growth over the past year was impacting affordability.
“A year ago, price growth was relatively low, but 12 interest rate rises saw mortgage repayments increase by nearly 50 per cent, which has affected housing affordability,” she said.
“However, interest rates have been stable since November 2023 and what we’re now seeing is the effect of strong price growth on affordability. The Perth median house price increased 20.5 per cent in the year to June 2024, which has seen the average mortgage increase 16.1 per cent over the same period, according to the report.”
Price growth, Hart continued, has been fuelled by fierce demand from population growth, as well as limited supply from low building completions.
This all said, home buyers in the west remain undeterred by declining affordability, she added, noting that loan activity went up in the last quarter.
“The total number of loans to owner occupiers in WA increased 13 per cent over the three months to June and 7.1 per cent over the year to 10,836,” she observed.
“First home buyers were particularly active, making up 38.1 per cent of the owner-occupier market. The total number of loans to first home buyers was 4,133, up 9.2 per over the quarter and 2.6 per cent over the year.”
The average loan to first home buyers was $475,393, up 4.5 per cent quarterly and 17 per cent annually, REIA detailed.
Rental affordability also went down in the last quarter, with the proportion of family income needed to meet rent payments rising 0.6 percentage points to 23.6 per cent.
“Changing market conditions indicate rental affordability will continue to stabilise over the remainder of the year,” Hart explained.
“This report covers the three months to June quarter, however www.reiwa.com data to the end of August shows that median house and dwelling rent prices have been unchanged at $650 per week since March, while median unit prices have been $600 per week for five of the past six months,” she said.
This is due, Hart surmised, to changes in both demand and supply.
“On the supply side, we’re seeing investor-owned new builds come to the market, which is adding new supply. In addition, some tenants are also having their long-awaited new homes completed, allowing them to move out and free up some established homes,” she said.
“We’ve also seen the nature of demand change, with an increase in tenant household sizes as people seek to share the cost-burden of renting. People are also choosing not to rent, if possible.”