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Last year’s spate of interest rate hikes has put a considerable dent in housing affordability.
According to the latest Housing Industry Association –Commonwealth Bank Housing Affordability Index, affordability fell by 1.8 per cent in the December 2010 quarter to be down by 10 per cent on the December 2009 quarter.
“Housing affordability suffered a big hit over the course of 2010, with a clear driver being the interest rate increases in March, April, May and November,” HIA’s chief economist Harley Dale said.
“It is a positive sign for the housing industry that in 2011 the Reserve Bank has clearly signalled a period of interest rate stability. This situation could add to confidence and, in time, new home building activity.”
Mr Dale said the federal and state governments could enhance confidence towards new housing by delivering policy reform on a range of supply side constraints, including the lack of affordable land and the dire shortage of available credit for commercially viable residential projects.
"A downward trend in residential construction over nearly a decade now is obviously tied to a downward trajectory in housing affordability, which is in no small part attributable to supply side obstacles to new housing,” he said.
“Regardless of the particular juncture we are at with the interest rate cycle, lack of government action to reduce artificial constraints to new housing supply reduces Australians access to affordable housing.”