“As we had expected, housing affordability has continued to decline over the June quarter. What is of great concern is that we are now heading towards a percentage of income required to meet loan repayments of 35%, a level that we have not seen since the third quarter of 1990 - when the quarterly average banks’ variable mortgage rates were at approximately 16.4%,” said REIA President David Airey.
With the exception of Tasmania and the Northern Territory, housing affordability decreased across all Australian states and territories, with the proportion of income required to meet loan repayments increasing 2.0 percentage points nationally,” said Airey.
National Manager of Deposit Power, Keith Levy said, “Housing affordability remains an ongoing issue for many Australian home owners and prospective buyers. There is still a shortage of homes for sale and it appears that new development and construction isn’t keeping pace with demand in some areas.
“As a result, the cost of entering the market remains high and the dream of owning a home still appears to be far from reality for many Australians,” he said.
The Australian Capital Territory remains the most affordable state or territory in which to own a home, with the proportion of income required to meet loan repayments increasing to 18.0%; 16.6 percentage points below the national average.
New South Wales remains the least affordable state or territory in which to own a home with the proportion of income required to meet loan repayments increasing to 38.0%; 3.4 percentage points above the national average.
“The continuous increase in average monthly home loan repayments puts upward pressure on household finances, requiring home owners to decrease consumption of other goods and services to service their home loan debt,” added Airey.
“The worsening state of affordability is also negatively impacting the number of new home loans, especially those to first home buyers, whose participation has declined to levels, not observed since March 2005,” he said.
“The evidence for action on affordability is clear. There should be no further increases in interest rates as well as action from the new Government on the supply side factors and an increase in the First Home Owners Grant (FHOG) with indexing to median house prices,” he concluded.
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