Housing affordability improves to highest level since September 2009: HIA/CBA index

Housing affordability improved for the seventh straight quarter in September to be at its highest level in three years, according to the latest HIA-CBA Housing Affordability Index.

Over the quarter, the index increased by 5.3% to 65.8% to be up by 15% compared with the same quarter in 2011.

Affordability improved due to the median dwelling price falling from $466,900 to $459,100, and mortgage rates falling from 6.4% to 6% over the quarter.

Affordability improved in all capital city and regional markets with Hobart the most affordable with an index score of 78.3 - up from 73.1, followed by the ACT (67.8 to 71.3) and Adelaide (70 to 71.1).

Sydney’s affordability score improved from 51.9 to 54.2 over the quarter, but remains the least affordable capital city market, followed by Melbourne (63.6), Perth (64.1) and Brisbane (68.5).

In Victoria, South Australia and Queensland, it is more affordable to buy in the capital city market than in the regions.

HIA chief economist Harley Dale says the run of consecutive improvements in some regional indices is even longer, “in some instances showing affordability has reached levels not seen since the early 2000s”.

“Housing affordability has been improving on the back of steadily growing incomes, falling interest rates, and easing dwelling prices,” says Dale.

“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.”

A full explanation of how the index is calculated can be downloaded on the HIA website.