Improvement in housing affordability at six-year high

The Housing Industry Association’s (HIA) Affordability Index, which takes into account housing values, mortgage interest rates and wage developments, rose by 2.2 per cent year-on-year in the first quarter of 2019, representing the most significant improvement in affordability nationwide since September 2013.

“The boom in home building of the past five years is a key factor behind the improvement in housing affordability. With completion of new homes remaining at elevated levels, affordability is poised to continue to improve,” HIA chief economist Tim Reardon said.

“Wage growth also contributed to the improvement in affordability.”

In the year to March 2019, median house prices fell by 6.5 per cent nationwide. The decrease in prices was highest in Sydney at 10.7 per cent, followed by 5.3 per cent in Melbourne and Perth, and 1.2 per cent in Brisbane. Conversely, house prices in Adelaide rose by 4.6 per cent over the same period.  

Average incomes increased by 2.8 per cent Australia-wide in the year to November 2018, with the largest growth seen in Brisbane (5.8 per cent), followed by Sydney and Melbourne (both 3.2 per cent) and Adelaide (0.3 of a percentage point). On the other hand, average incomes fell 2.5 per cent in Perth over the same year.

According to the HIA’s Affordability Index, the only regions to not see an improvement in housing affordability in the March 2019 quarter are Hobart, Canberra and Adelaide, where affordability declined year-on-year by 5.1 per cent, 5.1 per cent, and 1.1 per cent, respectively.

According to Mr Reardon, this is due to ongoing house price growth.

The HIA chief economist said the biggest jump in affordability was seen in east coast capital cities, such as Sydney and Melbourne, where affordability improved by 12.4 per cent and 9.6 per cent year-on-year, respectively.

“Affordability in Sydney deteriorated to an extent that in June 2017 it required two average Sydney incomes to be able to afford repayments on an average Sydney home. In just over a year, this has improved to only requiring 1.8 standard incomes to purchase the same home,” Mr Reardon said.

In Perth, Darwin and Brisbane, affordability improved by 7.7 per cent, 5.9 per cent and 2.5 per cent year-on-year, respectively, according to the HIA’s Affordability Index for Q1 2019.

[Related: Affordability improves in March as house prices fall]