Housing affordability on the rise.

The March Quarter edition of the Adelaide Bank/REIA Housing Affordability Report shows improvements in housing affordability in all states and territories when compared to the same quarter in 2013.

Commenting on the report’s findings, Damian Percy, General Manager of Adelaide Bank said: “The proportion of family income needed to meet home loan repayments has fallen from 30.8% to 30.6%. On the rental side, the proportion of family income needed to meet rent payments has increased slightly from 25.4% in the December quarter to 25.7% .

“The latest findings represent a 5% gap between rental payments and home loan repayments. We welcome an improvement in this quarter, but what of the future? Are we making it easy for people to ‘right-size’ their homes and are State planning policies and taxes such as stamp duty limiting their ability or inclination to do so?

“I think it’s important to keep the housing affordability debate rolling. How can we make it easier for people to more readily upsize and downsize without having to agonise about and plan for such a move over years instead of months?

“Encouraging home ownership should be a key priority for any home lender and Adelaide Bank is committed to working with REIA to contribute to the development of sound public policy that will help ease the supply side problems that put upward pressure on housing.

“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” concluded Mr Percy.

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Australian Housing: 18 months of improving affordability

The December quarter of the Adelaide Bank/REIA Housing Affordability Report has found that housing affordability continued to improve slightly.

 “All Australian States recorded an improvement with Queensland and South Australia leading the way – both now 3.5% better – in terms of affordability since the December quarter a year ago”, said Damian Percy, General Manager, Adelaide Bank.

“First home buyers are on the rise in SA, WA, Tasmania and NT and my conversations with Adelaide Bank’s broker network also reveal that inquiries are on the increase nationally for people wanting to upgrade their home. 

“The improvement in affordability has come about due to the combination of interest rates hitting their lowest point in more than 50 years in real terms and an increase in National Median Weekly Family Income of 2.2% to $1616 over the quarter. 

“Buyers and up-graders are again emerging, which in turn is generating interest in some of the less restrictive ‘bridging style’ finance options that Adelaide Bank offers. Mortgage brokers are looking for tight turnaround times, particularly in the more active property markets. 

“Between the September quarter and the December result, the average loan size increased by just over $5000, with the average first home buyer loan increasing by just $130 more than in the September quarter. 

“This suggests that entry price points are being carefully considered by new housing market entrants, they are sticking to tight budgets and that they are not prepared to take on any more debt than they absolutely have to. In short, this appears to be conservative behaviour reflecting uncertain times for now,” Mr Percy concluded.

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General Manager of Adelaide Bank, Damian Percy said: “The number of first home buyers has continued to rise and rental affordability has also stabilised.  Compared to the September Quarter last year, we have now observed a 14.3% increase in new finance commitments to first home buyers, bringing this segment back up to almost 20% of all residential home buyers. 

“This is still quite a long way off the 30.8% level for first home buyers recorded in the June Quarter of 2009 but there are several factors that seem to be driving this growth.   Median weekly family income has also increased from the September Quarter in 2011 by around $250 per month.  

“The average loan size of new lending commitments is now at $320,542 and average monthly loan repayments are up slightly to $2,176, or $544 per week.  The current low interest rate environment is encouraging many people to re-visit and weigh up the ‘buy VS rent’ equation.    

“Certainly there are many desirable parts of Australia where it is now cheaper to buy and make loan repayments than it is to rent and around a fifth of all homebuyers are first home owners who have decided to come down on the ‘buy’ side of the equation”, Mr Percy concluded.   

Fast Facts

• Victoria recorded the largest improvement with the proportion of income required to meet loan repayments decreasing 4.4% compared to the September quarter 2011.
• The number of new finance commitments to first home buyers increased by 6.0% to 26,075 in the September quarter.
• Compared to the September quarter of the previous year, new finance commitments to first home buyers increased 14.3%.
• Compared to the same quarter of the previous year, housing affordability in the Northern Territory and the Australian Capital Territory declined.
• Over the quarter, the number of loans to first home buyers increased in all states and territories with the exception of Queensland and the Northern Territory.
• Across the country New South Wales was the only state or territory to record a decrease in the number of new finance commitments to first home buyers. 
• During the quarter, first home buyers made up 19.0% of the market compared to 17.9% in the June quarter. 
  The REIA Home Loan Affordability Indicator (HLAI) is moving in the right direction.

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Median weekly family income is now $1,560, compared to $1,493 in the June Quarter 2011. The average monthly loan repayment is $2,155 compared to $2,290 in the June Quarter 2011.   

Compared with the June quarter 2011 all Australian states and territories recorded improvements in housing affordability. The number of loans to first home buyers increased by 5.9% to 25,101 for the June quarter 2012 and by 11.8% compared to the June quarter of the previous year. 

The number of loans to first home buyers increased in all states and territories with the exception of New South Wales and the Northern Territory. 

Victoria was the standout, recording the largest increase in the number of first home buyers for the quarter, up by 23.5%.   Victoria also recorded the largest increase in the total number of loans, up by 16.0%.   The total number of loans Australia-wide (excluding refinancing) increased 8.9% over the June quarter to 91,982. 

General Manager of Adelaide Bank, Damian Percy said: “The figures seem to indicate that many people are now deciding to get on with their lives and are again making decisions about their housing choices – regardless of continuing volatility in global financial markets.” 

“I think simple timing is a factor.  Age waits for no-one. Older people in bigger houses make lifestyle choices to ‘downsize’, younger people have growing families and need to upsize.  The imperative to ‘right-size’ your dwelling at a particular life stage can drive decision-making to an extent. 

“Many people have been delaying these important choices and housing decisions for nearly five years.   

“In June 2011, 35.4% of family income was required to meet home loan repayments. In the June Quarter 2012, the figure had come down to 31.9%, a 3.5 percentage point drop. 

“This is still a significant chunk of family income, but moving nonetheless to relieve some of the pressure on household budgets. Appropriate and affordable housing underpins stable and successful communities and we forget this at our peril.  

“In terms of rental costs across the nation, we are seeing stability in most cases and mounting evidence to suggest that in some areas, it can now be more affordable to meet the cost of mortgage repayments over renting,” Mr Percy concluded.

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