Australia: Houses Increasingly Unaffordable

Australian Housing affordability has fallen to its lowest level yet according to a key measure of the housing market. The March 2007 quarter HIA/Commonwealth Bank Housing Affordability Index is now 10.3 percent lower than at the same time last year.

The index fell for the fourth consecutive quarter due mainly to a 1.3 percent rise in the average price of a first home. The index is now at its lowest level since it was established in 1984.

The Australian monthly loan repayment on a typical first home mortgage rose to $2387 (£985) from $2352 (£971). Mortgage repayments now account for 30.7 percent of an average first home buyer’s income, up 0.2 percentage points on the December 2006 quarter.

HIA managing director Ron Silberberg said, “The housing affordability crisis shows all the signs of structural supply constraints; it is not part of some market cyclical trend that will correct itself. This continuing decline confirms previous calls by HIA for a national response to restore housing affordability.”

All of Australia’s big cities except Melbourne experienced declines in affordability. Perth was the least affordable city. The average house price in Perth rose by 5.6 percent in the March quarter. Hobart was the most affordable city in which to live.

Outside the big cities, affordability fell in all areas except for New South Wales and South Australia. The situation was worst in Western Australia, where the average cost of a first home rose by 10.2 percent.