FHBs come out to play despite affordability downturn

The release of the Adelaide Bank/Real Estate Institute of Australia Housing Affordability Report reveals that housing affordability is generally on the decline nationwide, while first home buyers are increasing and renters have entered a relief period.

According to the report, the proportion of median family income needed to meet an average loan repayment is up by 1 per cent this quarter to 31.4 per cent, an increase of 0.2 per cent on the June quarter last year.

Despite affordability declining, first home buyers (FHBs) have increased 14 per cent over the quarter and 1 per cent over the last year.

“A slight increase in housing affordability shouldn’t overshadow the welcome news that the number of FHBs increased by 14.0 per cent during the quarter," said Darren Kasehagen, head of business development at Adelaide Bank.

“Compared to the corresponding quarter in 2016, the number of FHBs went up in Queensland, Western Australia, the Australian Capital Territory and the Northern Territory, with both territories recording very solid FHB growth of 49.6 per cent and 40.0 per cent, respectively.”

Median rents also saw a decrease in income needed to meet rent repayments to 24.3 per cent, a 0.6 per cent decrease over the quarter and a decrease of 0.5 per cent on the June quarter last year.

Rental affordability saw improvements in every state and territory over the quarter, except for the ACT, which held steady. However, the ACT is the most affordable state or territory to rent in, at 17.9 per cent of income required, while NSW is the least affordable at 28.6 per cent.

The report showed that the average loan size for FHBs increased to $317,500, a rise of 1.2 per cent over the quarter and 0.6 per cent over the last year, with FHBs making up 14.3 per cent of all owner-occupiers including refinancing and 20.8 per cent when excluding.

Meanwhile, the average loan size for non–FHBs increased to $386,664, a rise of 3.7 per cent over the quarter and 4.5 per cent over the last year.

The national median weekly family income rose to $1,696, a rise of 0.5 per cent over the quarter and 2.2 per cent over the June quarter last year; and the average monthly loan repayment rose to $2,311, a rise of 4.1 per cent over the quarter and 3.1 per cent over the June quarter last year.

Mr Kasehagen continued, stating that average loan sizes saw an increase over the last year in New South Wales, Victoria, Queensland and the Northern Territory, while they decreased over the quarter in South Australia, Tasmania and the Australian Capital Territory.

“This improvement was recorded across all states and territories except in the Australian Capital Territory, which was stable. In fact, it costs less on average to meet mortgage payments in Tasmania and the Northern Territory than it does to rent.”

The report breaks down state and territory around the nation to gauge housing affordability and the state of FHBs and renters. Here are the results:

NSW

Housing affordability declined in the state over the quarter, as income needed to meet loan repayments rose to 38 per cent, a rise of 1.9 per cent over the quarter and 0.9 per cent over the June quarter last year.

Rental affordability, as mentioned previously, increased over the quarter, with the proportion of income to pay rent decreasing to 28.6 per cent, a fall of 0.4 per cent over the quarter.

The number of first home buyer loans increased to 4,297, up by 19.5 per cent over the quarter, which accounts for 13 per cent of the state’s owner-occupier market. The average loan for FHBs rose to $365,000, up by 1.2 per cent over the quarter.

The number of loans rose to 32,394, up by 12.6 per cent over the quarter, and rose to an average value of $467,203, up by 5.3 per cent over the quarter and is the largest average loan size nationwide.

Victoria

Housing affordability also declined in the state over the quarter, as income needed to meet loan repayments rose to 33.4 per cent, a rise of 0.9 per cent over the quarter and 0.6 per cent over the June quarter last year.

Rental affordability increased over the quarter, with the proportion of income to pay rent decreasing to 23.1 per cent, a fall of 0.7 per cent over the quarter.

The number of first home buyer loans increased to 6,648, up by 10.1 per cent over the quarter, which accounts for 21.1 per cent of the owner-occupier market. The average loan for FHBs rose to $329,267, up by 1.8 per cent over the quarter.

The number of loans rose to 31,533, up by 12.3 per cent over the quarter, and rose to an average value of $399,055, up by 12.3 per cent over the quarter.

Queensland

Continuing the trend, housing affordability declined in the state over the quarter, as income needed to meet loan repayments rose to 27.2 per cent, a rise of 0.2 per cent over the quarter, but a decrease of 0.5 per cent over the June quarter last year.

Rental affordability increased over the quarter, with the proportion of income to pay rent decreasing to 23 per cent, a fall of 0.7 per cent over the quarter.

The number of first home buyer loans increased to 6,003, up by 11.8 per cent over the quarter, which accounts for 25.3 per cent of the state’s owner-occupier market. The average loan for FHBs rose to $296,033, up by 1.8 per cent over the quarter.

The number of loans rose to 23,735, up by 5 per cent over the quarter, and rose to an average value of $325,867, up by 2.2 per cent over the quarter.

South Australia

Housing affordability declined in the state over the quarter, as income needed to meet loan repayments rose to 26.8 per cent, a rise of 0.6 per cent over the quarter, but a decrease of 0.1 per cent over the June quarter last year.

Rental affordability increased over the quarter, with the proportion of income to pay rent decreasing to 21.9 per cent, a fall of 0.7 per cent over the quarter.

The number of first home buyer loans increased to 1,358, up by 12.6 per cent over the quarter, which accounts for 18 per cent of the state’s owner-occupier market. The average loan for FHBs fell to $260,400, down by 1.7 per cent over the quarter.

The number of loans rose to 7,554, up by 4.6 per cent over the quarter, and rose to an average value of $301,867, up by 2.7 per cent over the quarter.

Western Australia

Housing affordability declined in the state over the quarter, as income needed to meet loan repayments rose to 23.6 per cent, a rise of 0.2 per cent over the quarter, but a decrease of 0.3 per cent over the June quarter last year.

Rental affordability increased over the quarter, with the proportion of income to pay rent decreasing to 18.1 per cent, a fall of 0.5 per cent over the quarter.

The number of first home buyer loans increased to 4,128, up by 16 per cent over the quarter, which accounts for 33.7 per cent of the state’s owner-occupier market. The average loan for FHBs rose to $308,633, up by 0.2 per cent over the quarter.

The number of loans rose to 12,259, up by 8.3 per cent over the quarter, and rose to an average value of $341,408, up by 1 per cent over the quarter.

Tasmania

Housing affordability declined in the state over the quarter, as income needed to meet loan repayments rose to 23.9 per cent, a rise of 0.3 per cent over the quarter and 0.2 per cent over the June quarter last year.

Rental affordability increased over the quarter, with the proportion of income to pay rent decreasing to 25.8 per cent, a fall of 0.8 per cent over the quarter.

The number of first home buyer loans fell to 380, down by 3.3 per cent over the quarter, which accounts for 16.8 per cent of the state’s owner-occupier market. The average loan for FHBs fell to $238,667, down by 0.7 per cent over the quarter.

The number of loans fell to 2,246, down by 0.5 per cent over the quarter, and rose to an average value of $241,379, up by 1.3 per cent over the quarter.

Northern Territory

Housing affordability improved in the territory over the quarter, as income needed to meet loan repayments fell to 20.3 per cent, a fall of 0.8 per cent over the quarter and 1.8 per cent over the June quarter last year.

Rental affordability also increased over the quarter, with the proportion of income to pay rent falling to 23.1 per cent, a decline of 0.6 per cent over the quarter.

The number of first home buyer loans rose to 175, up by 36.7 per cent over the quarter, which accounts for 25.7 per cent of the state’s owner-occupier market. The average loan for FHBs rose to $316,333, up by 1.7 per cent over the quarter.

The number of loans rose to 684, up by 5.4 per cent over the quarter, and fell to an average value of $308,662, down by 3.4 per cent over the quarter.

Australian Capital Territory

Housing affordability improved in the territory over the quarter, as income needed to meet loan repayments fell to 19.8 per cent, a fall of 0.3 per cent over the quarter and 0.7 per cent over the June quarter last year.

Rental affordability was stable over the quarter, with the proportion of income to pay rent holding at 17.9 per cent.

The number of first home buyer loans rose to 570, up by 49.6 per cent over the quarter, which accounts for 23 per cent of the state’s owner-occupier market.

The number of loans rose to 2,476, up by 15.5 per cent over the quarter, and fell to an average value of $377,441, down by 1.4 per cent over the quarter.

[Related: Affordability issues have borrowers turning to mum and dad]

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Sasha Karen

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