Housing affordability declines, rental affordability improves

While Australia’s home buyers continue to struggle with more challenging income requirements to afford housing, the nation’s renters are seeing conditions easing slightly across much of the country, according to a new report.

How housing affordability is harder

According to the latest Adelaide Bank/REIA Housing Affordability Report, the proportion of median family income required to meet average loan repayments increased by 0.2 percentage points to 31.4% in the second quarter of 2017.

That said, these tighter requirements aren’t discouraging first home buyers, with the total number of loans and the number of loans to first home buyers increased by 9.6% and 14% respectively, with increases in all states and territories except Tasmania.

As a result, first home buyers now make up 14.3% of Australia’s total owner-occupied housing, with this rate having dropped steadily over the past 5 years, before stabilising over the past 18 months.

According to the report, the average loan size to Australian first home buyers is now $386,664, a 3.7% increase over the June quarter or a4.5% increase compared to last year. Victoria tops the charts as the State with the largest number of first home buyers, followed closely by Queensland.

Relief for renters

But it’s a different story for Aussie renters, with the report finding that the proportion of median family income required to meet rent payments reduced by 0.6 percentage points to 24.3% over the past quarter in all states and territories except Tasmania (which declined by 0.8 percentage points to 25.8%) the ACT (which remained stable).

According to Adelaide Bank head of business development, Darren Kasehagen, it costs less on average to meet mortgage payments in Tasmania and the Northern Territory than it does to rent.

REIA president, Malcolm Gunning, said:

“Historically, rental affordability declined markedly from the June quarter 2007 reaching its lowest point in the March quarter 2010. Since then rental affordability has been showing a trend improvement reflecting the pickup in investment in housing from the end of 2011.”

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