Current at: 21 May 2008
A surge in interest rates in the first quarter of 2008, combined with complex planning laws and exorbitant property charges and taxes have contributed to yet another record low for housing affordability. The HIA-CBA First Home Buyer Affordability Index fell by 3.5 per cent during the quarter to be more than 10 per cent lower than a year ago.
In the March quarter of 2008 interest rates increased by 0.8 of a percentage point on account of two official RBA rate rises and several retail rate increases. This led the average home loan payment to increase by 4.4 per cent to $2,799 per month.
HIA’s Chief Executive – Policy, Mr Chris Lamont said today’s report highlighted the importance of the Federal Government’s housing programs and the need for urgent planning and taxation reform across all levels of government. Mr Lamont said that without comprehensive reform affordability was unlikely to improve.
The report showed that affordability worsened in all capital cities with the exception of Sydney and a levelling out in Hobart. For the quarter, the greatest falls in affordability were recorded in Brisbane and Canberra. The result for Sydney was heavily influenced by a lack of new home sales, this in itself being a serious concern.
Up until the last five years, renting provided young families with an affordable alternative while a deposit was saved for a family home. Recent inflation figures confirm saving while renting is becoming increasingly difficult as rents are now eating not only into the family budget but making it impossible to save.
“The cost of planning and development charges is worthy of urgent attention as are chronic skill shortages which are adding to price and supply pressures. This should be the number one priority for Infrastructure Australia. Investment in infrastructure should be directed at where 80 per cent of Australians live, urban Australia,” said Chris Lamont.
The HIA/Commonwealth Bank First Home Buyer Affordability Index fell by 3.5 per cent in the March 2008 quarter and was 10 per cent lower than a year earlier.
This latest fall was a result of higher interest rates over the first quarter of the year which offset what was still relatively strong household income growth.
The monthly loan repayment needed on a typical first-home mortgage rose from $2,681 to $2,799, an increase of 4.4 per cent. Mortgage repayments account for 29.1 per cent of total first home buyer income, a 1 percentage point increase on the December 2007 quarter. The ratio also increased as a proportion of household disposable income.
