Australia's housing affordability worsens by 2% in December

author-avatar By on March 05, 2020
Australia's housing affordability worsens by 2% in December

Photo by Joseph Marcus on Unsplash

The Reserve Bank may have cut the cash rate four times recently, but this has seemingly done nothing to improve housing affordability.

According to the Real Estate Institute of Australia (REIA) Housing Affordability Report for the December 2019 quarter, affordability declined by 2%.

This is after the three rate cuts occurring in June, July and October of 2019. 

To put that into perspective, this means the proportion of income required to meet home loan repayments has increased to 34.7%.

Housing affordability worsened across the country, with the exception of quiet achiever the Northern Territory, where affordability improved. 

"It's still very difficult for first home buyers," REIA president Adrian Kelly told 7.30.

"It's very difficult for them to access all of that large amount of money at the one time."

Thinking about refinancing to a low-rate, variable owner-occupier home loan? Below are a handful of low-rate loans on the market. 

New South Wales housing affordability

New South Wales remains the least affordable state in Australia to buy a home.

Housing affordability declined by 3% over the December quarter, with borrowers needing to devote almost half of their income (42.8%) to meet their home loan repayments.

That's 8.1% higher than the national average. 

With Sydney's median house price expected to surge by $100,000 this year, those figures are likely to get worse. 

Despite housing affordability worsening in New South Wales, the number of loans to first home buyers spiked by 5.6% over the quarter. 

Sydney also remains the most expensive city to rent, with a median rent of $574 per week.

While that sounds expensive, it's actually cheaper than it was a year ago when the median rent was $582 per week. 

Victoria housing affordability

Borrowers in Victoria will need to devote 36.5% of their income towards home loan repayments, an increase of 1.9% over the quarter. 

The number of loans to first home buyers in Victoria increased by 14.1% over the quarter and a big 18% increase compared to the previous December quarter.

According to the report, first home buyers make up 40% of the state's owner-occupier market while the average first home buyer loan was $426,308 - a 10% increase from the December 2018 quarter. 

Melbourne's median house price is tipped to soar by 8% this year and a further 3-5% in 2021.

If those forecasts pan out, Melbourne's median house price will hit the $1 million mark in 2021. 

Queensland housing affordability

Queenslanders with a mortgage will need to set aside just over 30% of their income to meet their home loan repayments, an increase of 1% over the quarter.

First homer buyers are rife in the sunshine state, with an 8.1% increase in loans made to first home buyers. The average loan size for a first home buyer was just over $361,000.

Rental affordability was also down for the December quarter, with households needing to devote 22.1% of their incomes to make the median rent of $440 per week. 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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