Housing affordability issues stick around for 2020

According to Tim Lawless, the property information group’s head of research, such a “nominal recovery in housing values implies home owners are becoming wealthier, which may also help to support household spending”.

“However, the flip side is that housing affordability is set to deteriorate even further as dwelling values outpace growth in household incomes, signaling a setback for those saving for a deposit,” he warned.

The impact of worsening housing affordability is likely to deliver a slowdown in activity across price-sensitive segments of the market, the researcher explained.

This is especially so in Sydney, where Mr Lawless flagged dwelling values as already sitting 8.2 times higher than gross annual household incomes halfway through the year.

Despite this, a rise in investors who are attracted by prospects for capital gains and a positive spread between mortgage rates and rental yields “should help to offset a reduction in activity from more price-sensitive buyers”.

Additionally, Mr Lawless said smaller cities where housing is more affordable and economic conditions are showing improvement “may offer some insulation” for investors who will see advertised stock levels rise.

He noted that jobs growth and population growth is slowing across NSW and Victoria, whereas conditions are improving in Queensland, Western Australia and, to a lesser extent, South Australia.

Comparatively low housing prices, coupled with higher migration rates and improving jobs growth, could play out positively for the capital cities in these areas.

With the research expert tipping household values to rise through 2020 across most regions, he did offer that “the year may bring about a change in the growth dynamic”, with larger cities expected to see a slowdown in the rapid rate of growth recorded through the second half of 2019.

Mr Lawless highlighted that “in contrast, smaller capitals such as Brisbane and Perth, as well as key regional centres and lifestyle markets could see an improvement in conditions as buyers are attracted to affordable prices coupled with job opportunities and lifestyle factors”.