'Welcome boost' for affordability in housing gloom

by Adam Smith01 Dec 2011

Affordability is getting a boost as the housing market continues to soften and interest rates fall.

New research from RP Data has shown median values continued to decline in October, but research director Tim Lawless said there is a welcome upside amid the declines.

"The combination of lower interest rates, cheaper homes and rising incomes is generating a welcome boost to housing affordability, particularly in those markets where value falls have been more significant," Lawless said.

Some capitals have taken a hammering, however, with Brisbane values now 9.5% off their peak and down 8% year-on-year. Perth and Melbourne have seen significant falls from peak prices as well, tapering 7% and 5.8% respectively. Sydney and Canberra have proven the most resilient, with Sydney only 1.4% off its peak and Canberra down 1.1%.

Another bright spot in the gloom is rental growth. As median values have declined, rents have seen solid growth, Rismark managing director Ben Skilbeck said.

"While home owners and property investors have endured a 2.8% tapering in actual home values over the course of 2011, rental growth has been very solid. According to the ABS, the dollar value of rents has been rising at a 4-5% pace over 2011, Skilbeck said.

Skilbeck also claimed falling median prices will eventually filter back through to increased demand.

"With fixed-rate home loans as low as 5.99% now available in the market and variable rate loans being offered at 6.39%, we expect that the substantial improvement in affordability will flow into overall housing activity by the end of the first quarter next year," Skilbeck said.