Housing at its most affordable in a decade

by AB29 May 2014
Australia’s housing is at the most affordable now than in the past 12 years, according to the Housing Industry Association.
Record low interest rates and the slowing of home price increases have helped drive the HIA-CBA Housing Affordability Index to its most favourable level in 12 years during the March 2014 quarter, the association’s senior economist Shane Garrett said.
“Increases in home prices over the past year have been significant. However, the impact of lower interest rates and continued earnings growth has ensured that home purchase affordability has improved over the past year for existing home owners and those on the cusp of entering the market in the short term.”
The index improved by 2.1% during the first quarter of this year and affordability is now 10.8% more favourable than a year ago.
But the HIA new house affordability index declined to -2.3 for the March quarter, indicating that the affordability of new houses continues to be somewhat less favourable than existing houses.

However, HIA predicts a recovery in new home building is underway, and forecast that with 180,000 dwelling commencements across the country in 2014, this would represent an annual increase of 8.2% on 2013 levels.

“Beyond 2014 activity is expected to remain at elevated levels relative to recent history, however sustaining the high level of activity we now expect to see in 2014 appears unlikely,” the association said.

The Reserve Bank of Australia has signalled that interest rates are set to remain low for some time.
As home price pressures ease off, home owner affordability will remain reasonably favourable for the foreseeable future, HIA predicted.
“The key policy challenge exists well beyond this cyclical improvement in home owner affordability,” said Garrett.
“Ensuring adequate and affordable housing for those harbouring aspirations to one day enter the home ownership market and for the large number of rental households in Australia requires a concerted policy focus on boosting new housing supply. That needs to be a key policy priority for all levels of government.”


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  • by Denny 29/05/2014 10:21:45 AM

    SMH ran this article yesterday. 132 negative comments.

    I would rather pay interest of 10% on 100k in 1990 than 5% on 450k today lol

    The median wage is around 1k a week the loan repayment are around 700 a week. Average living costs are 600 pw per person...

    Tell me... Where is this 'magical $300 coming from?'

    Let me just call the bank 'excuse me. Do you take imaginary money? No? But the CBA-HIA said it's all good! Well that's bad for me...'

    Lol this reads like an ad.

  • by marty mcdonald 29/05/2014 11:18:25 AM

    @ Denny I don't disagree silly article but as to your missing $300. You forgot.
    1) 2 income families.
    2) lowest quarter to a third of income earners would not have home loans so median income is not appropriate as a measuring tool.