Regional house affordability falls as boom moves nationwide

author-avatar By on March 12, 2021
Regional house affordability falls as boom moves nationwide

Housing affordability has deteriorated in regional areas along with capital cities as living preferences shift in the pandemic.

Figures from the latest Housing Industry Association (HIA) Affordability Index for the December 2020 quarter show a faster decline in regional housing affordability compared to the eight capital cities.

The regional affordability index fell by 3.7% to return to its December 2019 level, while the capital cities' affordability fell 2.5%. 

This index is calculated quarterly, taking into account the latest dwelling prices, mortgage interest rates and wage developments. 

According to HIA Economist Angela Lillicrap, housing became less affordable overall in 2020 due to rising prices in addition to a slight fall in average incomes.

However, record-low interest rates have helped with affordability.   

Archi1

Source: Archistar 

"Despite the decline, housing is considerably more affordable than the average over the past 20 years," Ms Lillicrap said. 

“With the onset of COVID-19, consumer preferences have shifted towards detached housing and regional areas.

“Preliminary migration data shows more Australians left the capital cities in each of the first three quarters of 2020 than at any other time since records began in 2001. This involved an acceleration of retirement plans and fewer people moving to urban centres for work or education.

"As a consequence of this shift in population, house prices in regional areas outperformed the capital cities over the past year."

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 19, 2021. View disclaimer.

Prices have risen sharply over 2020 in spite of what most economists and banks initially predicted, with Sydney housing prices hitting a new record high of $895,933 (median) last month. 

Nationally, dwelling values increased 2.1% in February, and CoreLogic expects these prices to continue to grow, which has caused more Australians to increase their concerns about housing affordability.

Figures from the Australian Bureau of Statistics (ABS) shows record numbers of people leaving capital cities, as more than 11,000 people left them in the three months to the end of September. 

With more and more Australians turning to regional hotspots for work and affordability purposes, Ms Lillicrap says this trend will be permanent. 

"When ‘normal’ does return, however, young students and workers will once again move to employment centres in capital cities."

Of the capital cities in HIA's index, Darwin saw the sharpest decline in affordability during the quarter, falling from an index reading of 134.6 to 128.0.

Brisbane and Adelaide followed with declines of 3.1% each, while Sydney and Melbourne remain the most unaffordable despite only falling 0.8% and 1.4% respectively. 

See also: Should you make a regional move post-COVID? 

'Boom' conditions now in every capital market 

Data from property intelligence firm Archistar shows the housing market boom isn't just limited to Sydney and Melbourne, with every capital city now experiencing boom-time conditions. 

While this is great for sellers and those who can afford to buy, it's less-great news for those struggling to buy or those on low incomes. 

According to Archistar's National Housing Market report, housing prices are actually now reaching their "full potential", and the pandemic is only one factor. 

"We've had roadblocks in the orderly conduct of our housing markets really going back over the last three or four years, perhaps longer," Chief Economist Dr Andrew Wilson told Australian Broker. 

"Of course, the fluctuations in prices, demand and affordability are all about interest rates, but we've had other factors outside of them and the RBA's control of the macroeconomy."

The factors Dr Wilson cites include:

"Now that restrictions have been eased, we've seen markets heading back to where they should have been if it wasn't for these impediments," he said. 

"The growth now is a lot about catch-up, particularly in Melbourne and Sydney, because those cities suffered the most from those roadblocks, in particular because of their higher levels of investors.

"This will run its course over the year. Once prices get to the point where the low rates and high incomes are soaked up, we'll see a flattening in growth."

Archi2

Source: Archistar 

Another factor that could be driving up prices is a "dire shortage of property listings", according Upside Realty Director of Sales James Kirkland.

Listings across capital cities are down 19.4% compared to this time last year, and Mr Kirkland says market uncertainty is causing many to buy before selling their current property. 

“We usually see natural movement in the market, but this hasn’t occurred in the last 12 months due to so much uncertainty and people holding off selling. While many are desperate to buy, there’s still so many sellers choosing to wait it out and not put their home on the market,” he said. 

“We saw an 86% increase in the average number of groups attending our opens in January 2021 compared to January last year.

"This shortage of stock is driving up prices.

“With JobKeeper about to be phased out and banks calling in their loans, people are desperate to secure a property. So, if you’re thinking of selling, now is a good time to do it.”

Related: JobKeeper extension would see house prices spike higher in 2021


Photo via Joan You on Unsplash

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.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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