Australian homes become less affordable

Melbourne Photo credit: Kev Whelan

Homes in Australia are becoming less affordable, according to new figures, as prices continue to rise.

The Housing Industry Association's latest Affordability Index report shows that rising property valuers in the three months to June 2015 overwhelmed the benefits provided by the second interest rate cut for the year in May 2015. Sluggish wage increases have exacerbated the situation.

"The net negative impact of these factors saw the national HIA Affordability Index fall by 2.9 per cent to 79.7 in the June 2015 quarter," comments HIA Chief Economist, Dr Harley Dale. "The national affordability result masks wide variations around the country, an unsurprising finding given the lack of geographical consistency to the current residential cycle."

Indeed, during the June 2015 quarter, affordability deteriorated by 3.6 per cent in capital city markets, driven by Sydney and Melbourne. This was in stark contrast to a 2.7 per cent improvement for regional Australia.

Compared with the June quarter last year, capital city affordability worsened by 0.6 per cent, while in regional Australia affordability saw a 5.2 per cent improvement.

"The large differences in the results for the capital city Affordability Index and its regional counterpart, together with the variation in outcomes between capital cities, exposes the folly of sweeping generalisations which refer to an Australian housing boom.

"It is against this backdrop that authorities have escalated their requirements for the rationing of credit to residential investors. The risk is that this will obstruct new housing supply, aggravating affordability conditions in markets around Australia," he concludes.