Affordability for home buyers in Australia eased back in second quarter of 2016 as price growth returned to the residential real estate market.
Overall affordability fell by 3.7% and was 2.1% less than the same quarter of 2015, according to the latest report from the Housing Industry Association, the voice of Australia’s residential building industry.
The capital city housing affordability index fell by 4.3% during the quarter, while the regional market index experienced a 1.9% improvement.
‘Home price growth moderated in the early part of the year and the index showed an improvement in affordability during the March 2016 quarter. However, in the June quarter dwelling price growth returned and the index reverted to the level we saw at the end of 2015,’ said Geordan Murray, HIA economist.
‘While there was a decline in the headline index tracking the national picture, there was substantial variation around the country with substantial differences between states, and also differences between capital city markets and regional markets,’ he pointed out.
He explained that the geographic variation in affordability is most evident in the comparison between Melbourne and Perth. Over the last year, the median dwelling price in Perth has fallen by 4.7% while Melbourne’s has grown by 11.5%. This has seen the affordability index for Perth increase by 6.2% over the last year, while the index for Melbourne has fallen by 6.2%.
‘These differences in affordability align with the relative economic performance of these two states. The Western Australian economy is navigating the tail end of the mining boom which has seen conditions in the local labour market deteriorate and consequently the rate of population growth has fallen quite sharply,’ Murray said.
‘In contrast, Victoria has experienced a healthy level of growth in the labour force and continues to record the strongest rate of population growth in the country,’ he added.
A breakdown of the figures show that during the June 2016 quarter, improvements in affordability were observed in three capital cities with the largest improvement in Perth with growth of 3.2%, Darwin up 2.9% and Hobart up 2.2%.
Affordability worsened in the remaining five capital cities with the largest decline recorded in Melbourne with a decline of 7.4%, followed by Canberra down 5.7%, Sydney down 1.6%, Adelaide down 1.3% and Brisbane down 1%.
