• Housing affordability declines two per cent nationally

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    Author: Real Estate Institute of Australia (REIA)

    Housing Affordability Declines Two Per Cent Nationally | REIWA

    As interest rates continue to shrink on home loans, the ability for people to buy their own home also reduces.

    According to the REIA Housing Affordability Report for the December 2019 quarter, affordability has declined another two per cent.

    In practical terms this means the proportion of income required to meet loan repayments has increased to 34.7 per cent, equating to a two per cent increase over the quarter.

    REIA President Adrian Kelly across Australia, housing affordability has declined in all states and territories except for the Northern Territory where there was an improvement.

    Changes that impact the report

    "During the December quarter, the Reserve Bank of Australia (RBA) reduced the official cash rate to 0.75 per cent and the quarterly average variable standard interest rate decreased to 4.8 per cent," Mr Kelly said. 

    “The quarterly average three-year fixed rate decreased by 0.3 per cent to 3.1 per cent.”

    Certain considerable changes made in the lending finance data provided by the Australian Bureau of Statistics and the Australian Prudential Regulation Authority need to be highlighted against the report’s figures.

    “The major change is that owner occupied is now defined as the principle place of residence with loans secured against the owner-occupied dwelling for other dwellings now considered as investment loans,” said Mr Kelly.

    “Other changes include, rather than reporting loan approvals, borrower accepted commitments are now provided.

    “Where new loans included a variable component and a fixed term component these were previously recorded as two loans rather than one, and previously loans for alterations, additions and repairs were included, now only loans for construction, newly erected and established housing are reported.”

    National snapshot

    This is the first edition of the Housing Affordability Report since the changes to the collection and reporting of data.

    New South Wales had the largest decline in affordability of three per cent.

    Rental affordability declined marginally over the quarter with the proportion of family income required to meet rental payments increasing 0.1 per cent to 23.6 per cent. 

    Rental affordability improved only in New South Wales and Victoria as their median rents remained stable or reduced marginally.

    Western Australia snapshot

    Over the December quarter, housing affordability in WA declined with the proportion of income required to meet loan repayments increasing to 24.9 per cent, an increase of 0.5 per cent over the quarter, but a decrease of 0.4 per cent compared to the December quarter 2018.

    Rental affordability also declined during the December quarter with the proportion of family income required to meet the median rent increasing to 16.7 per cent, an increase of 0.4 per cent over the quarter and a marginal increase of 0.1 per cent compared to the year before.

    The number of first home buyers decreased to 3,580 in the December quarter, a decrease of 0.3 per cent over the quarter and 2.4 per cent compared to the same time last year.

    Of all Australian first home buyers over the quarter, 12 per cent were from WA while the proportion of first home buyers in the state’s owner-occupier market was 43.7 per cent.

    The average loan to first home buyers increased to $345,140, an increase of 2.4 over the quarter and an increase of 7.1 per cent when compared to the December quarter 2018. 

    More information

    Read the full media release from REIA which includes summaries from the other states and territories.

    View our Perth Market Snapshot graph for a detailed breakdown of how the WA property market performed last week.