CORELOGIC REPORTS ON HOUSING AFFORDABILITY

CoreLogic has released the June quarter Housing Affordability Report for Australia, with results indicating that although housing affordability has recently started to improve, the longer–term view is deteriorating.

The latest Housing Affordability Report looks at myriad sectors of the housing continuum.

It ranges from rental to ownership, with comprehensive measurement across varying factors including; the ratio of home price to household income, the challenge of saving for a deposit, mortgage serviceability and how much household income is required to pay the rent.

National results indicate that as at June 2018 the price to income ratio was measured at 6.81; a modest reduction from the March 2018 quarter when the national dwelling price to income ratio reached a record high of 6.84.

Across the broad dwelling types, the ratio of house prices to household incomes was recorded at 7.1 times, down slightly from the March quarter, while the unit price to household income ratio was recorded at 6.2, which was well down from its 6.6 times peak in late 2015 through to early 2016.

Commenting on the findings, CoreLogic head of research Tim Lawless said that those saving hard for a 20 per cent deposit may take solace in the fact that the national average is now 9.1 years for the typical household.

“Detached houses are generally more expensive, so take longer (9.4 yrs vs 8.3 yrs for a unit). Five years ago, it took just 8.5 years to save a 20 per cent house deposit and 8.3 years for a unit, a decade ago it took 8.8 years and 8.2 years respectively,” Mr Lawless said.

Despite the national dream of home ownership, it’s still cheaper to rent than repay a mortgage, with both house and unit rents currently costing 26.9 per cent of gross household income. In fact, stronger income growth relative to rents has pushed the national ‘rent to income ratio’ to its lowest level since September 2007.

Even at their peak, rents required less than 30 per cent of gross household income, the relatively healthy rent to household income ratio can be attributed to the low rate of rental price appreciation: national weekly rents have risen only 2.9 per cent per annum over the past 10 years, while household incomes have tracked 3.1 per cent higher per annum over the same period.

The cost of housing in regional Victoria is continuing to rise which is resulting in reduced housing affordability.

In fact, the price to income ratio and years to save a deposit metrics indicate the worst affordability on record across regional Victoria.

Over the past five years, median prices have increased by 22.2 per cent, which is slightly greater than the 15.6 per cent increase in household incomes.

Over the past decade, median prices are up 45.7 per cent compared to a 36.0 per cent increase in household incomes.

At a national level, the past 10 years has seen worsening housing affordability, fuelled primarily by strong growth in property prices across Sydney, Melbourne, Regional New South Wales and more recently Hobart.