Home Affordability Falls

The capacity of Australians to afford a home fell during the three months to the end of June, despite interest rate cuts, according to figures released yesterday by the Real Estate Institute of Australia.

The figures showed that interest rate falls had been more than offset by increases in housing prices and the size of home loans.

Mortgage payments increased to 32.2 per cent of the family income from 30.6 per cent at the end of March.

The increase, driven primarily by buoyant housing markets in New South Wales and the Australian Capital Territory, halted an 18-month improvement in housing affordability.

The chief executive officer of the institute, Mr Phil Roberts, said lenders had not passed on more than half the cut of one percentage point in official interest rates at the start of September.

He also urged the Government to reduce rates further, arguing that real (after inflation) rates were internationally high and that expectations of an economic recovery had faded sharply in the past few months.

Mr Roberts said preliminary figures for the three months to the end of September suggested that housing affordability had not improved.

``The generally optimistic talk (about the economy) during the June quarter is coming to naught." According to the June quarter figures, the national average monthly loan repayment increased by $37 to $943 and the median (middle) family income fell by $26 each month.

The national average home loan rose from $73,129 to $79,327, largely, again, because of rises in NSW and the ACT.

In Victoria, housing is more affordable than it was a year ago, but less affordable than at the end of March. The ratio of mortgage payments to income was 29.8 per cent at the end of June, down from 33.3 per cent a year ago, but up from 29.5 in March.

Average monthly loan repayments in Victoria rose by 0.2 per cent to $912, while the average size of home loans increased by 4.2 per cent to $76,212.

At the same time, median family income fell in Victoria by one per cent to $705.

In NSW, the ratio increased to 41.3 per cent from 36.9 per cent during the June quarter. A year ago, it was 44.3 per cent.

The affordability measures are calculated from median house prices and family incomes, and home loan data from banks and building societies.

House prices fell in Melbourne during the June quarter, with the median price dropping by 0.1 per cent to $138,000. They also dropped in Perth, where the median price eased 0.7 per cent to $95,500.

Prices in Sydney rose by two per cent to $174,800, in Canberra by 3.3 per cent to $125,900, in Brisbane by 0.6 per cent to $108,300, in Hobart by 0.8 per cent to $88,500 and in Darwin by 1.5 per cent to $105,000.