Australian Houses Become More Affordable
The residential construction industry in Australia has received some positive news with the latest data showing a continuation in improvement in housing affordability.
In the September quarter, the HIA-CBA Housing Affordability Index increased by 5.3 per cent to come in at 65.8 – a level not seen since the plummeting interest rate aftermath of the post GFC environment.
The Housing Industry Association (HIA) says affordability has improved across all geographic regions and is up by 15.0 per cent compared with the same quarter last year.
HIA chief economist Harley Dale has welcomed the latest figures, noting that the headline index has now risen for seven consecutive quarters and that affordability has been on the improve in some regional areas since the start of last decade.
“Housing affordability has been improving on the back of steadily growing incomes, falling interest rates, and easing dwelling prices,” Dale says. “At the same time, however, transactions volumes have remained historically low as economic uncertainty has weighed heavily on households’ willingness to engage in the residential property market.”
“Tentative signs of a recovery in transactions volumes should hopefully gather legs – another interest rate cut in early December would enhance the prospects of this occurring. An increase in home buyer action can occur without generating undue inflationary pressure and would assist a much-needed recovery in new residential construction activity,” Dale adds.
All else being equal, high levels of affordability encourage first-time home buyers into the market and encourage existing home owners to consider renovating or upgrading, providing a boon to the residential construction industry.
Taken together with recent data on residential land sales, the latest affordability data provides a further indication that the environment is ripe for a moderate housing recovery, which HIA expects to take hold early next year.
Whilst Sydney (54.2) remains Australia’s least affordable area, the northern part of Tasmania (90.4) is by far the most affordable area on record due to the weak economic conditions which continue to persist there. The HIA did not include Northern Territory in its analysis