Housing affordability is continuing to improve as incomes grow, lending rates drop and prices soften.
The HIA - Commonwealth Bank Housing Affordability Index has revealed that affordability is rising, with the index increasing 6.4% over the March quarter to be 11% higher over the year.
HIA senior economist Andrew Harvey said lending rates had tapered somewhat, while incomes saw modest gains. However, Harvey commented that affordability may have seen greater improvement had lenders not held back a portion of the Reserve Bank's cuts at the end of 2011.
"Cuts to the RBA cash rate totalling 50bps in late 2011 should have provided a much larger boost to affordability in the quarter, but the impact was eroded as lenders widened the margin between mortgage rates and the official cash rate," he said.
Harvey also claimed the improvement in affordability could be short-lived.
"We should be mindful that much of the recent improvement in affordability is driven by a cyclical softening in the economy and in house prices. Structural issues which dramatically push up the cost of housing, including high taxes, still need to be addressed and reformed," he said.
While overall affordability improved, Sydney and Perth both saw a deterioration of affordability, with indices in the cities falling by 1%.