Global uncertainty and buyer caution has helped to improve housing affordability in Australia.
According to the Housing Industry Association – Commonwealth Bank Housing Affordability Index, housing affordability improved by 0.8 per cent in the June 2011 quarter.
This outcome took the Affordability Index to a level that is 7.2 per cent above the level registered in the June 2010 quarter.
“Earnings growth and a small decrease in mortgage lending rates worked to improve housing affordability over the June 2011 quarter. These factors more than offset a small increase in the median house price,” HIA’s senior economist Andrew Harvey said.
In a somewhat ironic outcome, it was predominantly global economic uncertainty that led to this improvement in Australian housing affordability.
The RBA kept rates on hold during the quarter and improved conditions for Australian banks in wholesale lending markets facilitated a slight lowering of mortgage lending rates.
In addition, average weekly ordinary time earnings posted respectable growth of 1.2 per cent in the quarter, equivalent to an annualised rate of 4.8 per cent.
“Improved affordability is good news for home buyers. If we look through the GFC period which was skewed by unprecedented cuts to interest rates, we have not seen affordability reach its current level since 2006. With new home building activity moderating and some easing in pressure on skilled trades, now is a particularly good time to consider building a new home,” Mr Harvey said.
Housing affordability in the June 2011 quarter improved in Australia’s capital cities with the exception of Brisbane. Sydney improved by 2.0 per cent, Melbourne by 1.9 per cent, Adelaide by 0.2 per cent, by 3.2 per cent, Hobart by 1.5 per cent, and Canberra by 1.0 per cent.