The Australian residential housing market’s weakness in price development appears to have a silver lining as affordability continues to rise. Housing Industry Association analysts report that affordability hasn’t been this good in many regions since the early 2000s. Improved prices have yet to drive more transactions, however, due to formidable interest rates and high government taxation on home purchases. Experts say the price improvements seen in every major city will not help improve sales until these issues are addressed. For more on this continue reading the following article from Property Wire.
Housing affordability in Australia surged again in the last quarter of 2012, driven by earnings growth, interest rate cuts and weak price developments, according to the latest analysis from the Housing Industry Association.
The HIA-CBA Housing Affordability Index increased by 5.5% in the December 2012 quarter, representing an 18.4% increase on the same period of 2011.
‘This is the eighth consecutive quarter of increase in the index, bringing it close to levels not seen since the depths of the GFC during 2009,’ said HIA senior economist Shane Garrett.
‘For regional areas, affordability is at levels last seen during the early 2000’s decade. Affordability is on the increase in every part of the country,’ he explained.
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‘This has been driven by the weakness of price developments as well as the two cash rate reductions effected by the RBA in the final quarter. Continued growth in earnings has also served to make housing more affordable,’ he added.
He also pointed out that it is worth noting that affordability would be even more favourable to householders had recent RBA rate cuts been passed on fully be lenders.
‘Despite the relative attractiveness of house purchase implied by these figures, transactions activity on the ground is very sluggish. This underlines the need for stronger interventions from the RBA in terms of interest rates and from the government with regard to the heavy taxation of home purchase,’ said Garrett.
The HIA-CBA Housing Affordability Report recorded improved affordability in all seven capital city indices as well as improvements in the six indices tracking the non-metro regions of each state, excluding the Northern Territory which is not included in the analysis.
This article was republished with permission from Property Wire.