Housing affordability at near two-year high, led by Brisbane gains: HIA

Housing affordability improved by 2.2% over the December 2011 quarter, rising to just below levels last seen in December 2009, according to the latest HIA-Commonwealth Bank Housing Affordability Index. 

The overall index rose from 57.2 to 58.5, the fourth consecutive quarter (since March 2011) that housing affordability has improved. 

The improvement in housing affordability was led by a 7.9% gain in Brisbane, followed by Canberra (6.1%), Melbourne (4.6%), Perth (4.1%), Sydney (3.5%) and Hobart (3.1%).

Adelaide was the only capital city to buck the trend, with housing affordability declining by 3.6% over the quarter.

Sydney continues to have the highest required monthly loan repayments ($3,635) among capital cities, while in the non-metro regions, WA repayments are the highest ($2,843).

The two RBA rate cuts in November and December were the primary reason affordability improved, with average interest rates falling from 7.05% to 6.8% and monthly mortgage repayments dropping from $3,007 to $2,955 despite the median dwelling price rising from $470,600 to $473,000.

Outside of the capital cities, affordability improved in New South Wales (up by 0.5%), Victoria (up by 7.8%), and Tasmania (up by 0.3%).

Non-metro affordability declined in Queensland (down by 0.1%), South Australia (down by 2%), and Western Australia (down by 5.5%).

“A decrease in mortgage lending rates and continued earnings growth more than offset a modest increase in the median dwelling price to further improve housing affordability in the December 2011 quarter,” says HIA’s senior economist Andrew Harvey.

“As expected, the interest rate cuts in November and December of last year saw housing affordability continue to trend in the right direction. When the recent improvements in affordability are considered alongside the easier access to skilled trades as home building activity has eased, it increasingly looks like a good time to buy a new home for those financially able to do so,” he says.

In the most recent quarter average weekly ordinary time earnings posted growth of 0.5% and mortgage lending rates were down by 0.25%.

Meanwhile, home prices rose by 0.5% in the December quarter although they were down by 1.8% over the year.