Housing affordability is improving – but it doesn't matter for FHBs

Association says new data is "cold comfort" to first home buyers being kept out of market by red tape

Housing affordability is improving – but it doesn't matter for FHBs


By Madison Utley

While new data has revealed properties within Australia are at their most affordable since the 1990s, the Housing Industry Association (HIA) has shone a spotlight on a subset of housing hopefuls who are struggling to access the reasonable prices and record low interest rates on offer – first home buyers.

According to the HIA’s Affordability Index, which considers the latest dwelling prices, mortgage interest rates and wage developments, housing affordability improved across all capital cities over the June quarter.

“The HIA-Housing Affordability Index for the June quarter 2020 shows housing in Australia remains at its most affordable since 1999,” said HIA chief economist Tim Reardon.

“This improvement in affordability means that it now requires less than 1.2 average incomes to service a mortgage on a median-priced dwelling in Australia’s capitals.

“This is a rapid improvement from just three years ago when it required more than 1.4 times the average income to service the same mortgage.”

The Index for the combined capital cities increased by 5.6%, led by Perth (+7.1%), Melbourne (+6.9%) and Sydney (+6.1%). Brisbane increased by 5.0%, followed by Canberra (3.3%), Hobart (+3.1%), Adelaide (+3.1%) and Darwin (+1.6%).

Unfortunately, the good news and strong statistics come as “cold comfort” to many first home buyers as repaying a mortgage is no longer the primary barrier to home ownership as has been the case for the past two decades.

“The challenge facing first home buyers is no longer their ability to repay a loan, but in obtaining a mortgage in the first place,” said Reardon.

The “decade of red tape” the economist is referring to includes the “raft of restrictions” APRA and ASIC imposed following the 2007 Global Financial Crisis. From that time onward, the number of home loans issued with a 10% deposit fell from 21% of all loans to just 7%.

“As the Governor of the Reserve Bank, Phillip Lowe said, the pendulum has swung too far. The additional red tape imposed in recent years means banks are increasingly lending to those that already own a home,” Reardon said.

“Improving access to finance helped pull the economy out of the 1990s recession and it can do the same for the COVID-19 recession.”

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