Housing affordability across Australia has marginally improved, according to data, as home loan sizes have decreased and income levels have increased moderately. This news is good for those who are looking to buy a home.
The latest Housing Affordability Report released by the Real Estate Institute of Australia (REIA), suggests that the income required to meet an averagely sized home loan has fallen by 2.4% to 30% of a borrower’s income.
According to the report, all Australian states or territories had improved in housing affordability, except the Northern Territory. This territory had a 0.7% increase in the proportion of income needed to service home loan repayments.
New South Wales (NSW) witnessed the highest level of improvement in housing affordability with the amount of income needed to service mortgage repayments falling by 4.0% to 35.4%. Victoria’s rate decreased by 1.9% to 32.7%. Queensland, on the other hand, had a decline of 1.5% to 26.1%.
South Australia saw a 1.2% decrease to 25.9%, while Western Australia realised a decline of 0.8% to 23.2%. Tasmania fell by 0.7% to 23.0%. Though out of all Australian states and territories, the ACT remains that most affordable with the proportion of income needed to service home loans down by 0.6% to 19.3%.
The Housing Industry Association (HIA) lobbied the government to put together a new national housing affordability strategy and implement this as a part of their election promise. Based on discussions, there is a likelihood that a new minister will be appointed for housing and homelessness and that housing affordability will be on the agenda of the Council of Australian Government (COAG). These measures ensure that housing affordability and supply remain a priority nationally.
An adequate supply of housing and the affordability of homes are challenges that need to be met head-on so that more Australians can purchase a home. It also assists those who are renting to be able to afford somewhere nice’ to live, rather than them having to live in homes that are not up to standard.
If you’re seeking to buy a home, then it is important to consider housing affordability in terms of what you can afford to repay monthly on a mortgage, and for you to look at housing costs as a proportion of your income. For a home to be considered as affordable it should cost you no more than 30% of your income to service the repayments on the property. For instance, if you earn $68,000 a year, then your mortgage should cost you no more than $17,400 a year to service or around $334 a week.
Ideally, the cost of your home should include your mortgage repayments, council rates, and insurance, with some funds allocated to maintenance and energy. However, with energy costs rising significantly since the deregulation of electricity and gas, it is difficult for Australian households to include this as a part of their home affordability.
To overcome the affordability of energy, many households are looking for smaller and smarter home floor plans, which are more energy efficient. For a home to be considered as affordable in this capacity, it should have greater thermal efficiency more insulation, glazed windows, be built from environmentally friendly materials and have solar water – so that it requires smaller and much simpler heating and cooling systems.
Therefore, when you go in search of a home, it is important for you to consider the purchase price of the property and the ongoing costs of the home as well. To determine this, look critically at how the property’s construction, and ask how much the property costs to heat and cool, and insure, and what the council rates are. Knowing these values will allow you to ascertain the home’s affordability and decide whether or not it’s suited to your budget.
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