Housing affordability sees an improvement

The June quarter edition of the Adelaide Bank/Real Estate Institute of Australia Housing Affordability Report shows an improvement in housing affordability nationally with the proportion of median family income required to meet average loan repayments decreasing by 0.6 percentage points to 29.4 per cent. Compared to the corresponding quarter in 2015, the figure decreased by 0.9 percentage points.

• The national median weekly family income increased by 0.5 per cent to $1,659 during the June quarter. This represents a 2.3 per cent rise when compared to the same quarter in 2015.
• The average monthly loan repayment was $2,116 – a 1.3 per cent decrease over the quarter and a decline of 0.5 per cent when compared to the corresponding quarter in 2015.
• The average loan size increased marginally by 0.1%, to $369,390 or a 2.7% rise compared to the June quarter in 2015.

Damian Percy, General Manager, Adelaide Bank said: “Moderation in house price inflation and average borrowings nationally over the June Quarter has meant the proportion of weekly income needed to service a mortgage has fallen to 29.4 per cent. 30 per cent is the figure traditionally used as a measure of ‘housing stress’.

“This is welcome news, but of particular note is the continuing long term decline in the number of first home buyers. When you consider that modelling for adequacy of income in retirement typically assumes that people own their own home, this should be concerning to policymakers.

“While there are encouraging signs of a turnaround in some States, first home buyers now make up just 14.3% of the owner-occupier market, a disappointing figure and a long term trend.

“First home buyer numbers are on a glide-path to what is currently a two decade low. This trend will provide major challenges for future governments, ultimately impacting the number of people on public housing waiting lists and in supported housing. The time to fix government housing policy is now, not in ten, twenty or thirty years’ time.

“Wherever you decide to live, Adelaide Bank’s continuing and widely recognised contribution to improving housing affordability is to keep the cost of lending as low as we can, while providing great service through Australia’s growing network of mortgage brokers.”

Fast Facts

• Victoria recorded the biggest annual increase in the number of loans to first home buyers across the nation at 19.3%.
• Western Australia has the highest proportion of first home buyers on the owner-occupier market nationally at 19.0%. The average loan to first home buyers went down 2.3% over the quarter and by 8.0% compared to the June quarter 2015.
• The ACT remains the most affordable state or territory in which to buy a home or rent, but recorded the only quarterly decline in housing affordability across the country. The proportion of income required to meet home loan repayments increased marginally by 0.1 percentage points, to 19.4% showing a slight decline of 0.1 percentage point when compared to the same time last year. The ACT was also the only jurisdiction to record a decline in rental affordability over the June quarter.
• South Australia had the second biggest annual increase in the average loan size across the country.
• Tasmania recorded the biggest annual increase in the number of loans to first home buyers across the nation. The number of first home buyers in Tasmania increased by 6.9% over the June quarter. This is also an increase of 24.3% compared to the same quarter of the previous year.
• Queensland recorded no change in housing affordability over the quarter.
• The NT had the biggest annual decrease in the average loan size across the country. The average loan size to first home buyers decreased by 4.0% over the quarter and by 9.0% when compared to the same time last year.
• NSW remains the most unaffordable state or territory in which to buy or rent.

Rental Affordability

• The Australian Capital Territory was the only jurisdiction to record a decline in rental affordability over the June quarter. At 17.8%, the proportion of family income required to meet the median rent increasing by 0.4 percentage points over the quarter.
• New South Wales recorded an improvement in rental affordability with the proportion of family income required to meet median rent payments falling 0.1 percentage point over the quarter, to 28.9%.
• Victoria improved over the quarter with the proportion of family income required to meet median rents going down by 0.2 percentage points, to 23.7%.
• Queensland improved over the quarter with the proportion of family income required to meet the median rent going down by 0.3 percentage points during the quarter to 23.6%.
• South Australia improved over the quarter with the proportion of family income required to meet rent payments decreasing by 0.9 percentage points over the quarter, to 22.0%.
• Western Australia improved with the proportion of family income required to meet the median rent decreasing by 0.5 percentage points over the quarter.
• Tasmania improved with the proportion of income to meet median rents sitting at 25.0% – a 0.9 percentage point decrease over the quarter.
• The Northern Territory recorded an improvement in rental affordability with the proportion of income required to meet the median rent decreasing by 1.1 percentage points to 25.1%.