Costs rise to own and rent
HOUSING affordability is again in the spotlight, following the release of research examining the costs of owning and renting a home.
Housing affordability declined across all Australian states in the December quarter of 2016, with New South Wales remaining the least affordable state or territory for homebuyers, according to the Real Estate Institute of Australia.
The Adelaide Bank/REIA Housing Affordability Report saw the proportion of income required to meet loan repayments rise to 30.4%, an increase of 0.9 percentage points over the quarter but a decrease of 1.9 percentage points compared to the corresponding quarter of 2015.
REIA President Malcolm Gunning said historically low interest rates and modestly rising incomes were unable to offset the increasing size of mortgages resulting in the rise in the proportion of the median family income required to meet average monthly loan repayments.
"Over the December quarter, affordability declined in all states with New South Wales the least affordable, while Tasmania had the smallest average loan size,” Mr Gunning said.
The report doesn't just look at the cost of owning a home; the cost of renting a home is also well researched, at the the report shows rents also rising during the last three months of last year.
"Rental affordability also declined during the fourth quarter of 2016 with the proportion of median family income required to meet rent payments increasing 0.2 percentage points to 24.4%,” Mr Gunning said.
"Whilst rental affordability declined for the quarter, for the 12 months to December it improved. Since mid 2012 rental affordability has been showing a trend improvement reflecting the pick up in investment in housing from the end of 2011.”
There was also some good news for first home buyers in the report; with their numbers up across the board.
"First homebuyers now make up 13.8% of total owner occupied housing,” Mr Gunning said.
"This rate has been dropping steadily over the past 5 years yet seems to have stabilised over the past 12 months. However, the size of the average loan for first home buyers increased by 1.3% over the December quarter to $323,633, but below the peak in the December quarter 2015.”
Mr Gunning said while the modest increase in first home buyers is welcome news, the increase in the average loan size is concerning.
"If this trend continues, then the proportion of first home buyers in the market will continue at low rates.”
LJ Hooker CEO Grant Harrod believes more can be done to address housing affordability, starting with stamp duty.
"LJ Hooker conducted a survey of more than 2,600 property owners which found that stamp duty was a major factor in the decision making process for those looking to sell and buy property,” he said.
"The survey found that 51% of home owners that received an appraisal by a real estate agent but did not subsequently list their property for sale, would, in fact, do so if stamp duty was lower. This figure rose to 61% if stamp duty was abolished altogether.”
My Harrod said the numbers highlight the choke-hold the current stamp duty tax has on the secondary market; Australians families would like to sell, move and relocate but cannot afford the cost of transacting.
"According to our data the reduction or removal of stamp duty will see more properties come onto the market, which in turn will help balance the current supply and demand
Mr Harrod said the regionalisation and decentralisation of government services and businesses would also go a long way to aiding affordability.
"With more than 90% of the Australian population living in a capital there is a need to incentivise businesses to relocate, or start-up, some or all, of their business in our major and minor regional centres,” he said.
"This regionalisation will boost the economies of these smaller regions and provide employees access to more affordable housing in these areas. It will also elevate some stress and demand on infrastructure, services and housing in capital cities.”
But Mr Harrod said solving housing affordability is not a one-step process.
"Nor is there one bandaid answer; instead, state and federal governments should work together to look at a number of solutions which could eleviate housing stress, so our children's children will be able to afford property in all the major cities across Australia.”