Australian property affordability boosted by low rates

Further interest rate reductions are helped the Housing Industry Association’s Affordability Index to rise 3.2 per cent in the third quarter of 2013. The aggregate capital city affordability index increased by 2.6 per cent over the September 2013 quarter; affordability now stands at 15.2 per cent higher than in the same three months last 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 per cent, followed by Canberra (6.3 per cent), Perth (3.2 per cent), Melbourne (2.6 per cent), Adelaide (2.4 per cent), Brisbane (1.5 per cent) and Sydney (0.5 per cent).

Increases were even stronger across regional Australia, with affordability rising 3.4 per cent over the quarter to be 17.4 per cent higher than the third quarter of last year. Outside of the capital cities, affordability improved in the September 2013 quarter in four out of six non-metro regions reported.

This improved affordability is in spite of house price increases in several markets, as mortgage rates decline.

 “Since late 2011, the RBA has cut rates by a total of 225 basis points, including reductions in both May and August of this year. As a result, the discounted variable interest rate for mortgages has declined from 7.05 per cent to 5.18 per cent over the same period,” pointed out HIA Senior Economist Shane Garrett.

“Affordability has been further enhanced by continued increases in weekly earnings over the past year,” he added.

“This new house affordability advantage provides a signal for further growth in new construction activity in those markets,” commented Shane Garrett. “This necessary growth nonetheless faces constraints that require attention as a matter of priority.”