A key measurement of housing affordability has recorded a slight improvement off the back of easing dwelling prices, the Housing Industry Association (HIA) has revealed.
The HIA-Commonwealth Bank Housing Affordability Index improved by three per cent in the March quarter.
With interest rates steady over the period, the main contributors to improved affordability were growth in average weekly earnings and a softening in dwelling prices.
"Improved affordability is great news for home buyers, particularly first home buyers with sound financial positions who have been considering entering the market in 2011,” said HIA's senior economist Andrew Harvey.
“With new home building activity moderating and some easing in pressure on trades, now is a particularly good time to consider building a new home," he said.
Across the capital cities, Melbourne was found to be the most unaffordable city, recording a decline of 1.6 per cent.
Affordability improved most in Perth (6.1 per cent) and Hobart (4.1 per cent) while Canberra’s affordability deteriorated 0.9 per cent.
In Sydney affordability registered an improvement of 2.5 per cent, while Brisbane saw an improvement of 1.6 per cent.
In Adelaide affordability was up 1.5 per cent.
"Melbourne has once again overtaken Sydney in the recent jostling for the unenviable title of home to Australia's least affordable housing,” Mr Harvey said.
“This is primarily due to the average weekly earnings of Sydney-siders faring better than those of Melbournians through the 2011 quarter," he said.
Outside of the capital cities, affordability improved in the non-metropolitan regions of Western Australia (6.6 per cent) and Tasmania (1.3 per cent), but deteriorated in NSW (-0.5 per cent), Victoria (-2.4 per cent), Queensland (-0.1 per cent) and South Australia (-1.2 per cent).
Despite the welcome overall result affordability remains 2.8 per cent below the level registered one year ago.