Housing affordability will only get worse

Melissa Jenkins
(Australian Associated Press)

 

As a key ratings agency warns housing affordability will get worse, the country’s peak welfare group is calling for bold action from the prime minister to tackle the problem.

The Property Council has also weighed in ahead of the May 9 federal budget, warning the coalition against tampering with negative gearing.

Moody’s Investors Service says overall housing affordability will worsen due to rising house prices, as soaring prices outweighs low interest rates and modest wages growth.

House prices rose by an average of 13.6 per cent over the last three years, while incomes rose by just 4.4 per cent.

“The increasing divergence between housing prices and income growth will … place further stress on housing affordability,” Moody’s said.

On average, double income households need 27.9 per cent of their monthly income to meet monthly mortgage repayments in March 2017, up from 27.6 per cent at the same time last year.

Affordability worsened in Sydney, Melbourne and Adelaide in the year to March, largely due to house price growth, but improved in Perth and Brisbane.

Melbourne recorded the biggest deterioration in affordability over the year, with 30.3 per cent of household income spent on mortgage repayments, up from 29.2 per cent a year earlier.

Moody’s found Sydney is the most sensitive market to changes in housing prices, income and interest rates.

Australian Council of Social Service head Cassandra Goldie has urged Prime Minister Malcolm Turnbull to not back away from tackling housing affordability.

“Australia’s housing affordability crisis is serious and we need a serious plan to tackle it. We have become a nation of housing haves and have-nots,” she said.

The Property Council says the government should not tinker with negative gearing, noting the tax break supports the rental property market.

“Support the rental market – don’t play with negative gearing and use market solutions for affordable rental housing,” it said in its housing affordability plan.

The council suggests low deposit loans for first home buyers, based on their rental and work histories, as well as a review of rules that discourage pensioners from downsizing their homes.

Meanwhile, the auction market remains strong, with 72.1 per cent of the 1,732 homes that went under the hammer selling in the week following Easter.

That’s well above the 69.7 per cent clearance rate at the same time last year, according to property analytics firm CoreLogic.

Volumes were up as expected, with Melbourne recording the largest increase in auctions, jumping to 823 from 102 in the previous, holiday affected week.

It also returned the highest clearance rate of all the capital cities at 76.8 per cent.

CAPITAL CITY PRIVATE TREATY MEDIAN HOUSE PRICES

Sydney – $1,005,000

Melbourne – $710,000

Canberra – $640,000

Darwin – $562,500

Brisbane – $509,000

Perth – $500,000

Adelaide – $440,000

Hobart – $367,000

UNITS

Sydney – $737,000

Melbourne – $550,000

Brisbane – $399,500

Perth – $386,000

Canberra – $383,564

Darwin – $345,000

Adelaide – $330,00

Hobart – $300,512

Source: CoreLogic Property Market Indicator Summary week ending April 23, 2017.

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