Housing affordability declines over June

Housing affordability has declined generally in most capitals as subdued incomes growth, steady mortgage rates and higher home prices have resulted in buyers increasing their debt load.

An index of housing affordability that measures the average national owner-occupied home loan repayment as a proportion of the national average household income increased by 2.2 per cent over the June quarter. Higher index results indicate a higher income proportion of home loan repayments and lower housing affordability.

Sydney recorded the steepest decline in home loan affordability with an increase  in the local index of 3.8 per cent over the quarter. Melbourne was next highest with a 1.5 per cent increase closely followed by Adelaide 1.4 per cent.  Perth and Hobart recorded marginal improvements in affordability over the June quarter with index declines of 0.4 per cent and 0.2 percent respectively. Darwin home loan affordability however improved sharply with a fall 4.8 per cent with Canberra also recording a significant improvement over the quarter with a decrease in the local index of 3.1 per cent.

Although home loan affordability has declined in a number of capitals over the June quarter, all capitals remain well below the long term series average. However, with a diminishing prospect of lower mortgage rates and income growth likely to remain at near record levels together with  higher home prices, particularly in Melbourne and Sydney, home loan affordability can expected to continue to decline.

Dr Andrew Wilson is Domain Group Chief Economist Twitter@DocAndrewWilson join on LinkedIn and Facebook at MyHousingMarket.