Damian Percy, general manager of Adelaide Bank, says affordability won't improve while there is an unwillingness to "confront" voters who are "enjoying structural advantages that continue to keep a fire under house prices".
The proportion of income required to meet home loan repayments was 30.4 per cent in the December quarter of 2016, according to the latest Adelaide Bank/REIA Housing Affordability Report. The result was an increase of 0.9 percentage points over the quarter.
Housing affordability declined across all Australian states during the quarter, and New South Wales remains the least affordable state for homebuyers.
However, the proportion of income required to meet home loan repayments declined 1.9 percentage points compared with the corresponding quarter of 2015.
REIA President Malcolm Gunning said historically low interest rates and modestly rising incomes were not enough to offset the increasing size of mortgages.
“Over the December quarter, affordability declined in all states," said Gunning.
"The proportion of first-home buyers in the owner-occupier market was the largest in Western Australia,” said Gunning.
“Rental affordability also declined during the fourth quarter of 2016," said Gunning, "with the proportion of median family income required to meet rent payments increasing 0.2 percentage points to 24.4 per cent."
However, rental affordability improved for the year to December.
Since mid-2012, rental affordability has been improving, reflecting the pick up in housing investment from the end of 2011, said Gunning.
“Rental affordability for the quarter declined in New South Wales, Victoria, Western Australia, Tasmania and the Australian Capital Territory, but improved in Queensland, South Australia and the Northern Territory," said Gunning.
Damian Percy, General Manager Adelaide Bank said the silver lining in the report was the fact that there was a 6.6 per cent increase in the number of first-home buyers in the December quarter, and an increase of 0.5 per cent compared with the December 2015 quarter.
“First-homebuyers now make up 13.8 per cent of total owner occupied housing," said Gunning. "This rate has been dropping steadily over the past 5 years, but seems to have stabilised over the past 12 months."
Percy said, “Despite this increase in first-home buyer numbers, it is still a figure well below the historical average of 18.5 per cent of the owner occupier market since the early 1990’s."
“However, the size of the average loan for first-home buyers increased by 1.3 per cent over the December quarter to $323,633," said Gunning.
“The increase in the average loan size is concerning," said Gunning. "If this trend continues, then the proportion of first-home buyers in the market will continue at low rates."
Percy said an "unwillingness" of voters who are "enjoying structural advantages that continue to keep a fire under house prices" will mean prices remain on current trends.
If current trends continue, said Percy, young people in Sydney and Melbourne will "endure" lives with "lousy housing options.”
Fast facts from the report
The average loan size for Australian first-home buyers increased by 1.3 per cent over the December quarter to $323,633. This was a decrease of 1.5 per cent year on year.
Median rents increase slightly
Nationally, the December quarter saw a slight decline in rental affordability. The proportion of median family income required to meet median rents increased by 0.2 percentage points to 24.4 per cent.
Victoria tops again for first-home Buyers
New South Wales remains the least affordable state
Queensland
South Australia
Western Australia
Tasmania
Australian Capital Territory remains the most affordable state to buy or rent
Northern Territory
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See also:
Housing affordability on governments' agenda
Demographia report links lack of affordable housing to rise of populism
Rates on hold, but housing affordability remains 'hotly debated'