Housing affordability takes a hit

Affordability is the cornerstone of home ownership across Australia, but there are often other factors to take into account. The latest housing affordability report from the Real Estate Institute of Australia (REIA) and Adelaide Bank shows that homes became more unaffordable across the country, but a strong supply of new homes could help to offset pricing pressures that are plaguing those with first home buyer loans.

The report found that households were required to pay a large proportion of their income on home loan repayments in January, rising 1.1 percentage points to 31.5 per cent. New South Wales was the most unaffordable state once again, but Tasmania also saw affordability decline – the figure jumped 1.5 percentage points to 25.9 per cent. This reflects the strong growth in prices, surging 7.8 per cent over the 12 months to February 28.

First home buyers needn’t be so disheartened by this news. The construction industry could help to ease rising prices over the next 12 months, if local governments put affordability at the top of their priority list.

Damian Percy, general manager at the Adelaide Bank, said the housing industry is already playing a sizeable role in supporting the national economy, buoyed by encouraging momentum in construction. Building approval numbers indicated solid growth in this regard. The Australian Bureau of Statistics revealed a 1.3 per cent increase in the number of approvals in January, following increases over the past eight months.

“Construction of new residential dwellings may be at the highest levels for some time, which is encouraging and certainly helping to get our economy moving again,” he said in a March 4 statement.

“Land may be short in Melbourne and Sydney, but we should be thinking more creatively. For example, opportunities exist for airspace to be better utilised.”

To be an effective panacea to housing affordability, Mr Percy said local, state and federal government needs to work alongside developers and lenders to guarantee a good supply of homes.