According to a new analysis, the affordability of housing in Australia has fallen to levels that have not been seen in decades as a result of rising interest rates and soaring home prices.
According to the property data business PropTrack, a household earning a median salary of $105,000 is only able to comfortably purchase 13% of the homes that are now on the market. This percentage represents the lowest levels share since the relevant data was first collected in 1995.
A household earning the median salary could have afforded about 40% of the residences (both houses and apartments) that were on the market about three years ago.
According to Paul Ryan, senior economist at PropTrack, “There has been a significant shift in paradigm and levels.”
According to the assumptions made in the Housing Affordability Report by PropTrack, a house is considered to be affordable if a median household does not need to spend more than 25% of their income on mortgage payments after making a deposit of 20%.
In New South Wales, a household with a median salary will only be able to afford that for 7% of the homes that are sold between 2022 and 2023. The percentage is 9% in Victoria, 16% in Queensland, 13% in South Australia, 22% in Western Australia, 5% in Tasmania, 46% in the Northern Territory, and 13% in the ACT respectively.
In order to purchase a home priced at the median, a household with a median income now needs to spend around one-third of their income on mortgage repayments. This is the highest amount levels seen since 1990.
According to Ryan, “During the course of the pandemic, when interest rates decreased, it was an excellent time for housing affordability, and since 2008, we have seen record numbers of first-time buyers entering the market.”
The data demonstrates that there are fewer properties that are within one’s price range as a result of the rise in both interest rates and housing prices. It’s really fairly incredible.
The amount of time it takes to save up for a deposit is also getting dangerously close to reaching record highs. If a household with a median salary put aside twenty percent of its earnings each year, it would take that household almost six years to save up enough money for a twenty percent deposit on a property that costs the median price.
According to the findings of the survey, households with low and middling incomes were in “incredibly stretched” conditions. Only three percent of the properties currently available on the market are within reach of a family with an annual income of $64,000.
The dramatic decline in the capacity of Australians to own a property coincides with a crisis in the affordability of renting, where the proportion of one’s salary required for rent payments has reached its highest level since June 2014.
According to Ryan, the majority of home purchases since the drop in affordability have come from buyers who were already in the market and were using the increased worth of their properties to upgrade. CoreLogic published its latest set of figures yesterday, which revealed that home prices levels had risen for the sixth month in a row.
Ryan remarked that “something needs to change.” “If the Australian dream is moving into home ownership, then the way we can push prices down is by building more homes,” said the politician, “rather than asking how we can throw money at first home buyers in the short term.”
According to Maiy Azize, a spokesman for Everybody’s Home, which is a coalition of organizations working in the fields of housing, homelessness, and welfare, Australia is becoming a society in which “only the wealthiest can avoid housing stress.”
She stated that the small number of residences that low-income families could technically afford, such as one-bedroom apartments, were likely unsuitable for such families because of the limited space in those dwellings.
And despite the fact that one million homes have been created in the last ten years – which is more than the growth of the population – she claimed that governments had played almost no part in making those homes accessible. She said that this was because tax arrangements favored investors rather than those who were trying to buy a house to live in.
This week, the Real Estate Institute of Australia (REA) stated that new ABS numbers indicating a 17-month low in inflation indicated that the RBA should not need to further raise interest rates. These figures were released earlier this week.
However, Hayden Groves, who is the president of the REA, stated that the real estate market continues to experience continuous challenges.
According to what he had to say, “new dwelling prices rose 5.9% in the 12 months leading up to July.” This was a reflection of the consistently high costs of labor and materials.
“However, the rate of price growth is moderating due to a slowdown in new demand and improvements in the availability of resources. ” “However, the rate of price growth is easing.
“Rent prices have edged up to 7.6% in the 12 months to July 2023, up from 7.3% in June, reflecting increasing demand for rental properties and tight rental markets across the nation.”