A second interest rate rise and stronger house prices has pushed housing affordability to a new three year low, according to the latest data from HIA/Commonwealth Bank Affordability Report.
According to the report, the much needed recovery in housing affordability has fallen into a black hole.
The report warned that the housing market is not far from the bad old days of the late 1990’s when mortgage interest rates reached 17%.
According to HIA/Commonwealth Bank Affordability Report, affordability deteriorated for the third consecutive quarter in September, falling by 4% to be 4.6% lower than in the September quarter last year.
HIA’s executive director of housing and economics Simon Tennent said the lack of action to address the obvious supply squeeze brought about by dwindling land stocks and an escalation in government charges on development, has now come home to roost.
“The unstoppable force of housing demand has met the immovable object, namely an industry constrained from getting affordable housing, apartments or land onto the market,” Tennent said. “The unacceptably low levels of housing affordability in Australia are restricting home ownership, constraining residential construction, and exacerbating already very tight rental markets.”
“Since the national housing cycle hit its peak it has been readily apparent that the triple whammy of spiralling land costs, excessive fees and charges, and planning red tape was making a tangible recovery in housing affordability virtually impossible.
“Moreover, a distinct lack of progress in addressing these three factors means that in the higher interest rate climate of 2006 we find ourselves back in the same affordability hole,” he added.
According to the Housing Affordability Index, the first home price is $361,500 as at September and at an interest rate of 7.8% – the monthly repayment was $2,194.
Tennent said first-home buyers entering the market would have to commit 29% of their income towards mortgage payments, the highest ratio in nearly three years and a ratio knocking on the door of the ‘no-go zone.’
“Home ownership is becoming more of a dream and less of a reality for an increasing number of households in Australia. With or without higher rates, this quite simply should not be the case by now. The need for urgent action rather than re-announcements has never been more compelling,” he concluded.
By Kathryn O’Meara
