Affordability’s improving

Housing affordability improved in most of Australia’s capital cities during the early months of 2018 as house price pressures eased, a new report shows.

HIA’s latest Affordability Index has revealed that conditions lifted 0.2 per cent across the eight capital cities during the March 2018 quarter.

Senior Economist Shane Garrett remarked that the improvement was held back by strong price growth in a few markets, including Melbourne and Hobart.

“Affordability in Sydney improved by 1.9 per cent as a result of the reduction in dwelling prices over the past six months, while in Melbourne the outcome was largely unchanged as price growth remains solid”, Garrett said.

“Current interest rate settings continue to benefit affordability. The RBA’s official cash rate is at a record low and hasn’t been moved in over 20 months – an unprecedented period of stability.

“Even though we have started to move in the right direction, housing affordability remains very challenging in the larger capital cities. The root cause of the problem is that the cost of producing new houses and apartments is still too high.

“Governments need to focus on solutions involving lower land costs, a more nimble planning system and a lighter taxation burden on new home building,” Garrett concluded.

HIA’s Affordability Index is calculated for each of the eight capital cities and regional areas on a quarterly basis and takes into account latest dwelling prices, mortgage interest rates and wage developments.

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