Housing gets more affordable
ANOTHER rise in the HIA-Commonwealth Bank Housing Affordability Index in the March 2012 quarter marks the fifth straight quarter of improvement.
Conditions are beginning to tilt back in favour of those trying to enter the housing market says the Housing Industry Association.
The Affordability Index improved by 6.4 per cent (3.7 points) in the March 2012 quarter to be 11.0 per cent (6.1 points) higher over the year.
"In the March quarter we observed a modest increase in earnings, a modest decline in lending rates and a softening in the median dwelling price, so all factors moved in a direction which improved housing affordability," said HIA's Senior Economist, Andrew Harvey.
"Cuts to the RBA cash rate totalling 50 basis points in late 2011 should have provided a much larger boost to affordability in the quarter but the impact was eroded as lenders widened the margin between mortgage rates and the cash rate.
"After accounting for the wider margins, the average mortgage rate during the March quarter was only 13 basis points lower than in the December quarter.
"Those trying to get a foothold into the housing market will welcome the recent improvement in affordability, and we should see further improvement in coming quarters as the May rate cut flows through.
"However, we should be mindful that much of the recent improvement in affordability is driven by a cyclical softening in the economy and in house prices. Structural issues which dramatically push up the cost of housing, including high taxes, still need to be addressed and reformed," added Mr Harvey.
Sydney and Perth both recorded deteriorating affordability in the March quarter of 2012 with their indices falling by 1.0 per cent and 1.8 per cent respectively.
Affordability improved in the remainder of Australia's capital cities with Melbourne up by 7.3 per cent, Brisbane up by 6.3 per cent, Adelaide up by 7.3 per cent, Hobart up by 3.0 per cent and Canberra up by 7.1 per cent.
Outside of the capital cities, affordability improved in all states with the exception of Victoria which was unchanged. Affordability in non-metropolitan New South Wales was up by 2.4 per cent, Queensland was up by 4.5 per cent, South Australia was up by 6.4 per cent, Western Australia was up by 8.7 per cent and Tasmania was up by 0.4 per cent.