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July 2019: Housing Affordability at an all time high

Housing AffordabilityWhat is ‘Housing Affordability’?

Housing affordability refers to the relationship between expenditure on housing and household income. And according to the Housing Industry Association (HIA) Affordability Index, right now housing affordability is the best it’s been in 20 years.

The HIA Affordability Index takes into account the latest dwelling prices, mortgage interest rates and wage developments. Which means that despite the fact that house prices have risen significantly faster than incomes over the last 20 years, lower interest rates mean that housing affordability has improved.

“For a home buyer with an average income purchasing a median priced dwelling (assuming a 10 per cent deposit), mortgage repayments will consume the smallest proportion of their earnings since 1999,” said Geordan Murray, HIA Senior Economist.

All capital cities saw an improvement in the HIA Affordability Index over the quarter to June 19, with Darwin having the greatest improvement of 4.8%. Melbourne increased by 3.0%, Perth by 2.6%, Brisbane by 2.6%, Sydney and Canberra increased by 2.4% respectively, followed by Hobart at 2.2% and Adelaide by 1.0%.

Improved housing affordability was also supported by Housing Occupancy and Costs Data released by the Australian Bureau of Statistics (ABS) earlier this month.

 

What else does the data tell us?

Despite the ABS Housing Occupancy and Costs Data showing improved housing affordability, it also show shows a decline in home ownership over the last few years.

In 2015-16, 68% of Australian households owned a home with or without a mortgage compared to 66% of Australian households in 2017-18.

Which raises the question, if the rate of home ownership has declined is it because it has become more attractive (read: cost effective) to rent?

 

Costs of Rent vs Mortgage Repayments

In 2007/08, the mean weekly housing cost to own a house with a mortgage was $573, whereas the mean weekly cost to rent a property was $421.

In 2017/18, the mean weekly housing cost to own a house with a mortgage was $479, whereas the mean weekly cost to rent was $444.

Over this ten year period, rents have increased yet mortgage costs have decreased.

In fact, the difference in the weekly mean cost of owning property with a mortgage vs paying rent has fallen by $117 per week. Paying a mortgage today is comparatively less expensive than it was ten years ago, when compared to renting.

BUT (and this is a big one), despite the costs of paying a mortgage becoming comparatively less expensive than renting, first home buyers are finding it harder to get into the property market due to lack of savings (most likely a consequence of having to spend a higher proportion of their income on rent!)

 

Taking the steps to owning your own home

If you’re looking to take advantage of improved housing affordability to buy your first home, but you’re also worried about a lack of savings, there are some things that might help.

You can read all about the recent changes to stamp duty for first home buyers here (which can help to reduce your purchasing costs).

Find out what other borrowing/ purchasing options might be available to you to here.

And if you want to know about family guarantee loans in more detail, click through to our Case Study here.

Or, just give us our team a call on 02 62866501 – we’d love to run you through your options, given your personal situation.

 

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You can find more information here:

https://hia.com.au/-/media/HIA-Website/Files/Media-Centre/Media-Releases/2019/national/housing-affordability-the-best-its-been-since-1999.ashx

https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/4130.02017-18?OpenDocument

https://stats.oecd.org/Index.aspx?DataSetCode=HOUSE_PRICES

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