Housing affordability sees strides in short-term, falls off in long-term

“Detached houses are generally more expensive, so take longer (9.4 years versus 8.3 years for a unit). Five years ago, it took just 8.5 years to save a 20 per cent house deposit and 8.3 years for a unit. A decade ago it took 8.8 years and 8.2 years respectively,” Mr Lawless said.

From a share of income required for mortgage repayments perspective, affordability is improving, as repayments for an 80 per cent LVR mortgage required 36.3 per cent of gross household income, which is down from 51 per cent over 10 years ago.

“This servicing reduction is partly because discounted variable mortgage rates have almost halved over the past ten years (from 8.85 per cent in June 2008 to 4.50 per cent in June 2018). At its peak a decade ago, a repayment on a house required 52.4 per cent of household income and a unit required 48.7 per cent of household income,” Mr Lawless added.

Rentvesting is proving to be a more viable style of living for investors, as it currently is cheaper to rent than repay a mortgage with rents costing 26.9 per cent of gross household income.

Nationally, the last 10 years have seen housing affordability weaken due to the strong influence of Sydney and Melbourne, as well as worsening conditions in regional NSW and Hobart. Past this, the research shows price growth has been limited with improving housing affordability through rising incomes and declining mortgage rates.

The research also takes an individual look at each capital city:

Sydney

Plagued with unaffordability problems, Sydney was deemed to be the nation’s least affordable housing market according to price to income ratio at 9.1, years to save a deposit at 12.1, and share of income required for repayments at 48.4 per cent. However, it is not the most unaffordable in terms of rent to income ratio, which is at 30.2 per cent.

Melbourne

Recent median price falls point to an improving affordability market in Melbourne, with price to income ratio at 8.1, taking 10.8 years to save for a deposit and the share of income required for repayments at 43.3 per cent. The rent to income ratio is also below the national average at 26.7 per cent.

Brisbane

Dwelling prices have stagnated in Brisbane and as such given housing affordability a chance to improve. The price to income ratio is at 6, the years to save a deposit is at 8 years and the share of income required for repayments is at 31.9 per cent. Renting in Brisbane is also more affordable than the national average at 25.4 per cent.

Adelaide

Adelaide has seen overall property stagnation, so price growth and unaffordability have largely remained stable. The price to income ratio is at 6.4, the years to save a deposit is at 8.5 years and the share of income required for repayments is at 33.9 per cent. Renting in Adelaide has fluctuated around a percentage point over the last 10 years from 26.3 per cent to 27.6 per cent. As of June 2018, it is at 27 per cent.

Perth

Property out in Western Australia’s capital has seen great strides in its affordability, with the price to income ratio currently at 5.9, the years to save a deposit currently at 7.8 years and the share of income required for repayments currently at 31.3 per cent. Renting is also quite affordable in Perth, with the rent to income ratio at 22.3 per cent

Hobart

With high levels of price growth in Hobart in recent years, affordability has taken a hit as a result. The price to income ratio is currently at 6.1, the years to save a deposit is currently at 8.1 years and the share of income required for repayments is currently at 32.4 per cent. While not very high, the rent to income ratio is higher than some of the capital cities at 30.4 per cent.

Darwin

The country’s northern capital city has always been the most affordable, and the recent results of CoreLogic’s research is no exception. The price to income ratio in Darwin is at 4, the years to save a deposit is at 5.3 years and the share of income required for repayments is at 21.1 per cent. Renting has also become very affordable over the last five years, dropping from 30.6 per cent in 2013 to 19.9 per cent in 2018.

Canberra

A capital city known for high property prices, Canberran property is actually becoming slightly more affordable. The price to income ratio is at 5.1, the years to save a deposit is at 6.8 years and the share of income required  for repayments is at 27.1 per cent. Renting is quite affordable, with the rent to income ratio at 21.4 per cent.

Looking regionally, regional NSW stands out as the least affordable regional area, with its price to income ratio at 7.2, the years to save a deposit at 9.6 years and the share of income required for repayments at 38.5 per cent – the highest in all three categories. Additionally, the area also holds the highest rent to income ratio at 31.7 per cent.

In terms of the most affordable regional areas, both regional South Australia and Western Australia tie for the most affordable in terms of price to income ratio at 4.6 and South Australia also has the most affordable years to save a deposit at 6.1, the most affordable share of income required for repayments at 24.6 per cent and the most affordable rent to income ratio at 23.7 per cent.