Australian residential housing has reached its most affordable point in five years due to lower interest rates and increased Government grants, a new report says.
The Housing Industry Association and Commonwealth Bank First Home Buyer Affordability Index gained 39.2% to 153.6 in the December quarter, the highest point since the March quarter 2003.
Housing affordability has increased in both regional and metropolitan areas, with Perth, Brisbane and regional Western Australia recording the largest improvements.
The HIA also claims the repayments on an average mortgage have fallen from $2796 to $2056 per month in the December quarter.
Key factors include the Reserve Bank’s decision to cut interest rates by 3% in the last four months of 2008, combined with the Government’s decision to increase the first home owner’s grant to $14,000 for already-built homes.
The Reserve Bank has since made another 100-basis point cut to the official rate, bringing it to a record low of 3.25%.
The HIA figures, based on modelling from the Bureau of Statistics’ Survey of Income and Housing 2005-06, also reveal that 135,000 homes paying mortgages have come out of “mortgage stress” since December.
HIA chief executive Chris Lamont says while the news is good in the short term, the primary concerns of housing affordability still remain.
“This is good news and hopefully the index will get a little better in the next report. It is clearly showing the sensitivity of interest rates to affordability is very strong and also highlights the importance of measures such as the first home owners grant.”
“The next report we’ll see the flow through of further interest rate cuts. We’ll also see a potentially higher percentage of people taking the grant.”
But Lamont says the next six to nine months will see prices fall to a point that is “probably as good as it gets”.
“We’re not seeing any large increases in supply, so supply is never going to meet underlying demand in Australia. So you’re going to see some reasonably tight movement in the market.
“Unless we have infrastructure charges reduction or GST abolished on homes… in the long term we’ll see deterioration in affordability.”
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