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Serviceability pressures intensify despite price dip

The proportion of income required to service a mortgage has increased despite the continued fall in residential dwelling valuers, according to new research.

The latest findings from Adelaide Bank and the Real Estate Institute of Australia’s (REIA) Housing Affordability Report, have revealed that the proportion of income required to meet loan repayments increased in the December quarter of 2018 from 31.1 per cent in the September quarter to 31.2 per cent.

Mortgage serviceability pressures increased in all states except Victoria and the Northern Territory, where the proportion of income required to meet loan repayments declined by 40 basis points (33.1 per cent) and 60 basis points (19.4 per cent), respectively.

The sharpest quarterly rise was in Tasmania (1.6 per cent to 26.3 per cent), followed by South Australia (90 basis points to 27.6 per cent), the ACT (90 basis points to 20.6 per cent), Western Australia (60 basis points to 23.1 per cent), NSW (30 basis points to 36.7 per cent), and Queensland (20 basis points to 28.1 per cent).

Repayment pressures increased despite a 2.3 per cent reduction in national home values reported by CoreLogic over the same quarter.

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However, on a year-on-year basis, national housing affordability levels improved by 40 basis points, from 31.6 per cent in the December quarter of 2017 to 31.2 per cent.

Adelaide Bank’s head of third-party banking Darren Kasehagen observed:  “The slight down-tick in housing affordability nationally for the quarter is disappointing, but when we look at the year-on-year figures, compared to the corresponding quarter of 2017, housing affordability has improved over the past year with the proportion of income required to meet monthly loan repayments decreasing by 0.4 percentage points.”

The Adelaide Bank/REIA research also reported mixed results when assessing the level of first-home buyer (FHB) activity.

Over the December quarter, the number of FHBs increased by 3.8 per cent, however, when assessed annually, FHB activity declined by 5.8 per cent.

Mr Kasehagen noted that FHB activity was most pronounced in Australia’s capital.

“In somewhat of a turnaround, first home buyer activity in Canberra/ACT has notably increased – by a remarkable 34 per cent which is indicative of a good deal of confidence in the local economy,” he said.

“The largest increase in the total number of loans was also in the Australian Capital Territory – up by 24.1 per cent, leaving NSW to record the smallest increase in FHB’s at just 2 per cent.”

The research revealed that, in total, the number of home loans issued to borrowers over the December quarter increased by 3.3 per cent but dropped by 9.4 per cent when compared to the December quarter of 2017.

[Related: Homeownership still desired but not expected]

Serviceability pressures intensify despite price dip
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