Housing affordability improves despite widely-publicised price increases

by AB28 Nov 2013
The good news on housing affordability continued in the September 2013 quarter, with improvements driven by further interest rate reductions, according to the Housing Industry Association (HIA)-Commonwealth Bank Housing Affordability Index.

The index increased by 3.2% in the September 2013 quarter, to a level of 75.1. The aggregate capital city affordability index increased by 2.6% over the September 2013 quarter to reach 72.2 - a level that’s 15.2% higher than in the September 2012 quarter.

The increases were stronger across regional Australia, with the affordability index rising by 3.4% over the quarter to reach 78.2. This level is 17.4% higher than in the same quarter in 2012.

"Despite widely-publicised dwelling price increases in some markets in recent months, affordability has continued to improve as a result of reduced interest rates," says HIA senior economist, Shane Garrett.

The RBA has cut rates by a total of 225 basis points since late 2011. As a result, says Garrett, the discounted variable rate for mortgages has declined from 7.05% to 5.18% over the same period.

"Affordability has been further enhanced by continued increases in weekly earnings over the past year.”

In the September 2013 quarter, the HIA-CBA Housing Affordability Index improved in every one of the seven capital cities covered. The strongest quarterly affordability improvement occurred in Hobart with a rise of 10.1%, followed by Canberra (6.3%), Perth (3.2%), Melbourne (2.6%), Adelaide (2.4%), Brisbane (1.5%) and Sydney (0.5%).

Outside of the capital cities, affordability improved in the September 2013 quarter in four out of six non-metro regions reported. The strongest quarterly improvement was for regional Victoria with a rise of 5.1%, followed by the non-metro areas of Queensland (4.4%), New South Wales (2.8%) and Western Australia (2.5%). Affordability declined by 1.2% in regional Tasmania and by 2.2% in regional South Australia.

The Affordability Report's recent addition of an index tracking new house prices relative to established house prices provides an indication of the affordability advantage to be found among new houses. In the September 2013 quarter, a new house affordability advantage was apparent in a number of markets. However, only in Sydney and Western Australia does this latest result represent a continuation of a trend of new housing affordability advantage that has been in place for a number of quarters.

"High taxation on new housing has adverse effects on affordability right across the market. The less than expedient release of shovel-ready land supply for new housing and inefficiencies in the planning process also need to be tackled. It is also important that infrastructure funding models are reviewed by policy makers so as to ensure that the affordability improvements of recent years prevail over the long term," says Garrett.


  • by L3nder 28/11/2013 10:49:45 AM

    There isn't a boom on and this wont help.....Not.

  • by Papery 28/11/2013 11:18:40 AM

    And a previous article spoke about the fear of apparant loosening of credit standards. Perhaps the affordability criteria as noted above needs to be viewed in conjunction with how the powers that be draw the issues of high ppty prices & (non-sustainanble) low interest rates.

    Dont we need to get back to basics...housing is about making sure we all have an affordable & secure roof over our heads whether we own it or rent it. Seems its now more about who can make the biggest buck & at whose expense